SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number:
October 31, 1996 1-11032
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PROFESSIONAL DENTAL TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Nevada 71-0644350
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
633 Lawrence Street, Batesville, Arkansas 72501
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (501) 698-2300
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Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.01 par value
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(Title of class)
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been the subject of
such filing requirements for the past 90 days. YES __X__ NO_____
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation SB is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.[X ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing price of the registrant's Common Stock as
reported on the American Stock Exchange on January 7, 1997, was $2.6 million.
The registrant's revenue for fiscal 1996 was $22.0 million.
As of January 24, 1997, the latest practicable date for which such
information is available, there were issued and outstanding 14,100,000 shares of
the Registrant's Common Stock.
Documents Incorporated By Reference
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The following documents are incorporated by reference herein:
None.
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PART I
ITEM 1. BUSINESS
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GENERAL
Professional Dental Technologies, Inc. ("Pro-Dentec" or "Company") is
principally engaged in the business of designing, manufacturing and marketing
products to dental professionals relating to the diagnosis, treatment and
prevention of periodontal and other dental diseases. The Company focuses on
incorporating the most current technological advances into its product
development. The Company uses extensive educational and other support systems to
help the dentist practice to today's standard of care. These activities are
based upon current concepts of disease, diagnosis, treatment and prevention. By
promoting a team concept which integrates and coordinates the efforts of general
dentists, periodontists and other dental specialists, hygienists and patients
themselves, the Company has positioned itself to take advantage of an enlarging
market by acting as a resource for change. The Company's products, including
proprietary software, hardware and instruments are designed to facilitate the
dental office's shift toward an earlier diagnosis and treatment of periodontal
and other dental diseases.
The Company was incorporated on July 12, 1900, under the laws of the
State of California under the name of The Banner Mine Development Company
("Banner Mine"). From 1906 until 1986 Banner Mine was inactive and conducted no
material business operations. In December 1986, the authority of the Company to
conduct business was reinstated and the domicile of the Company was changed to
the State of Nevada through the merger of the Company into a newly formed Nevada
corporation. Subsequently, on February 26, 1987, the Company amended its
articles of incorporation to, among other things, change the name of the
corporation to its current name, Professional Dental Technologies, Inc. In May
1991, the Company's Registration Statement on Form 10 filed under the Securities
Exchange Act of 1934, as amended, became effective, and the Company thereby
became a "reporting company" subject to the periodic reporting and other
requirements of the Act. The Company's shares of Common Stock were listed on the
American Stock Exchange Emerging Company Marketplace on March 18, 1992.
The Company's executive offices are located at 633 Lawrence Street,
Batesville, Arkansas 72501. The telephone number is (501) 698-2300.
Products
Rota-dent(R)
The Company's principal product is the Rota-dent, a proprietary,
patented, rotary-action, easy-to-use plaque removal and teeth cleaning device
dispensed by dental professionals to patients for use at home between dental
office visits. The Rota-dent is a rechargeable, power assisted instrument that
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is designed using a Lexan(TM) water-resistant power handle that accepts
interchangeable heads and uniquely designed, patented brush tips. The product
utilizes a cleaning action similar to that of the rotary instruments used by
dentists and hygienists to professionally clean teeth in the dental office. Each
Rota-dent instrument is supplied with two interchangeable heads so that
different persons can economically and hygienically use the same power handle.
Replacement interchangeable heads and brush tips are available through dental
offices and from the Company's Customer Service department by telephone.
Each of the patented interchangeable brush tips is comprised of
approximately 4,600 filaments made from a combination of three and four mil
fibers that, when compared to conventional toothbrush bristles, are less
abrasive to tooth enamel and gingival tissue (gums). The tips are soft, safe and
durable. The small size of the filaments and brush tips enables the user to
reach areas of the mouth that conventional toothbrushes generally cannot reach
effectively.
The Rota-dent's effectiveness is a result of its ability to remove
dental plaque. Plaque is a thin filmy substance that continually forms in the
mouth due to bacterial activity and, if allowed to remain, hardens on teeth as
calculus or tartar. Unless removed daily, plaque deposits can cause inflammation
and gingivitis and can ultimately lead to more severe periodontal disease, now a
leading cause of tooth loss in the United States. Numerous clinical trials
conducted at major university dental schools have shown the Rota-dent product to
be more effective than manual toothbrushing for removing plaque and controlling
gingivitis. Two one-year clinical trials published in a leading refereed
periodontal research journal, have shown that the Rota-dent is as effective as a
combination of floss, interspace brush, toothpicks and conventional toothbrush
in removing plaque, controlling gingivitis and reducing the bacteria that cause
periodontal disease. The Rota-dent was the first single product shown to do the
plaque removal job that formerly required several products and procedures.
The Rota-dent instrument has been engineered to be especially effective
for plaque removal from the area at or just below the gum line and
interproximally (between teeth), the most critical areas for cleaning to prevent
periodontal disease. Many dentists and hygienists recommend the use of the
Rota-dent instrument for applying anti-microbials and other medications to tooth
surfaces and gums. A study at the Harvard School of Dental Medicine, jointly
sponsored with Procter and Gamble, concluded that the effect of their leading
anti-microbial, Peridex(TM), is significantly enhanced when applied with the
Rota-dent.
Traditionally, a regimen of manual toothbrushing and flossing has been
recommended by dentists and hygienists as part of a sound program for oral
hygiene. Nevertheless, it is generally accepted that 90% of the general
population do not floss on a regular basis because it is too time consuming and
difficult. The Rota-dent product is routinely dispensed to simplify plaque
control for the general population, as well as for orthodontic, handicapped,
arthritic, and geriatric patients, as well as those who have received dental
implants.
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The Company relies upon numerous university clinical trials, some
sponsored by Company grants and others sponsored by major dental product
companies, to demonstrate to the dental profession that the Rota-dent product is
an effective plaque removal instrument. Based on these studies, the Rota-dent
product was awarded the American Dental Association's Council on Dental
Materials, Instruments and Equipment Seal of Acceptance as an effective cleaning
instrument, which significantly reduces both plaque and gingivitis when used as
part of a program for good oral hygiene and regular professional care. During
1996, the Company voluntarily relinquished the ADA Seal for the Rota-dent. This
action was taken as a result of the overly restrictive and burdensome
administrative requirements which the ADA sought to impose on the Company's
advertising and promotion of the product, requirements with which the Company
would have had to comply as a condition of retaining the Seal.
Prior to commercial introduction, the Rota-dent product was
test-marketed to over five thousand consumers and hundreds of dentists in the
United States. Early clinical trials at the Ohio State University School of
Dentistry showed that the Rota-dent could be most beneficial with a well defined
period of clinical instruction. At the urging of many clinicians, the Company
committed to keep the product exclusively in dental offices, as opposed to using
retail channels of distribution, to be dispensed from the office, as part of the
dentist's armamentarium against dental disease. This provided an additional
service for the dental practice to offer, as well as an incidental revenue
source.
The Company has engineered and owns computer-driven, automated, and
patented brush machines, semi-automatic and automatic brush cutters, tooling for
high precision metal parts, injection molding machines multi-cavity injection
molds for the product's plastic parts, as well as other manufacturing and
assembly equipment. With one exception, all plastic parts used to manufacture
the Rota-dent instrument are now produced in-house by the Company. There are
alternate sources of supply for all components and materials used in the
manufacturing process, and the Company is not dependent upon a single supplier
for any component or type of material for these products.
The marketplace for home use oral hygiene devices is highly competitive.
Several manufacturers of home use oral hygiene devices are better financed than
the Company and use a wider variety of distribution methods than the Company.
The Company competes with many different manufacturers of manual and
electrically powered tooth cleaning devices, including electric toothbrushes
such as the Interplak, produced and sold by Conair, the Oral B, produced and
sold by Braun, a division of Gillette, and the Sonicare, produced by Optiva
Corporation. These products are distributed primarily through retail sales
outlets. The Company successfully competes with these devices on the basis of
favorable long-term clinical studies, product design, product quality and
responsive service to both professionals and consumers. While most of the
Company's competitors rely on traditional retail distribution methods, the
Company believes that a professional distribution system is more effective in
the long-term. Thus, the Company has invested in clinical trials and in efforts
to demonstrate to dentists and hygienists the advantages of dispensing the
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Rota-dent product from their dental offices as part of their plaque control
programs and the other professional services they offer, including implant
maintenance, orthodontic appliances, the maintenance of cosmetic restorations,
post-surgical maintenance of periodontal cases and general preventive oral
hygiene. The Company holds several design and utility patents relating to the
Rota-dent (See "Proprietary Rights"), and has vigorously enforced its patent
rights and advantages against infringing parties. To date, all patent litigation
has been resolved in the Company's favor.
In fiscal 1996, sales of the Rota-dent and accessory products
represented approximately 75% of the Company's total revenues for the period.
Effective September 1, 1996, the Company raised the price of the Rota-dent by
6%, the first price increase for the product since 1986.
PDT Sensor(TM) Sc/RP Scaler
During fiscal 1996, the Company sold the PDT Sensor Sc/RP Scaler, which
is an ultrasonic instrument for use by dentists and dental hygienists for the
therapeutic removal of hardened deposits from root surfaces of teeth.
The PDT Sensor Sc/RP was distributed by the Company pursuant to the
terms of a joint venture agreement between the Company's wholly-owned
subsidiary, PDT Production Corporation, and Lyco, Inc. ("Lyco"), an Arkansas
Company. Under the agreement, Lyco was obligated to deliver to the Company's
manufacturing facilities in Batesville, Arkansas, the equipment, machinery and
technology necessary to produce the product, and the Company was obligated to
make available sufficient personnel and space to manufacture and distribute it.
Lyco was entitled to receive a royalty for each unit sold. The Company's
distribution rights covered North and South America.
The Company entered into the joint venture to manufacture, market and
distribute the scaler based on representations by its partner that led the
Company to believe that the scaler had a competitive edge over most other
ultrasonic scalers in the U.S. market. Subsequently, it was determined that the
scaler had to be redesigned. Sales activity was temporarily curtailed while the
Company completed redesign efforts. Shipment of the redesigned product began in
January, 1993. Nevertheless, for this and other reasons, the scaler did not
achieve satisfactory market acceptance.
The agreement with the scaler's licensor called for the Company to
guarantee to pay a minimum royalty amount each year. The Company did not, in
1996, sell scaler instruments in sufficient quantity to meet the guaranteed
minimum royalty obligation. Therefore, the Company was required, during 1996, to
make an additional royalty payment to satisfy the terms of the guarantee.
On September 30, 1996, PDT Production Corporation ("PDT") purchased its
partner's interest in the joint venture. On October 23, 1996, the assets of PDT
were assigned for the benefit of creditors. At the time of the assignment, the
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only creditors of PDT were the Company and its former partner. (See Note 5 to
the financial statements.) The assignment terminated the license with the former
partner. The Company has developed and expects to introduce in 1997 an
alternative scaler product. Based on advice of counsel, the Company believes
that the Company will have no further obligation to make payments under the
minimum guaranteed royalty provision of the license with respect to sales, if
any, of the alternative scaler. However, there can be no assurance that the
former partner will not assert a claim or commence litigation concerning the
failure of the Company to make royalty payments to the former partner with
respect to sales of the alternative scaler by the Company in 1997.
The Company competes with several other companies that manufacture,
market, and sell electronically powered dental scaling equipment. The Company's
largest competitor is Dentsply International, Inc., which distributes an
established dental scaler under the name of Cavitron(TM). The Company seeks to
compete with other manufacturers based on direct distribution to its established
network of dental practitioners, and through the product's increased
effectiveness and comfort for both the patient and clinician.
During the 1996 fiscal year, sales of the PDT Sensor Sc/RP Scaler and
accessories accounted for approximately 6% of the Company's revenue.
DENTAL PHARMACEUTICAL PRODUCTS
Pro-Dentec manufactures and markets a full line of topically applied
dental fluoride products, including rinses and gels. The line consists of
products applied in the office by dental professionals as well as products
utilized at home by the patient between office visits. This product line was
introduced to the market in 1993. Prior to January, 1993, the Company was
involved in a joint venture with a private label manufacturer of fluoride
products. This joint venture was terminated during 1993. The dental
pharmaceutical product line has been expanded each year since being introduced,
and is now the broadest-based and most complete fluoride product line available
in dentistry. In 1995, the Company introduced a line of prophy paste, used for
in-office prophylaxis. In 1996, a disposable prophy angle and a line of manual
toothbrushes and dental floss were introduced to the market.
The effectiveness of fluoride for fighting tooth decay is widely
recognized. Fluoride is also extensively used by dental professionals to help
fight the bacteria associated with periodontal disease, as well as to reduce the
sensitivity of exposed roots from soft tissue loss due to periodontal disease
and/or periodontal surgery.
The Company currently manufactures all its fluoride rinses and gels in
an FDA-approved facility in Batesville, Arkansas. The Company does not
anticipate significant difficulties in obtaining the materials necessary to
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manufacture these products. The Company competes with several other companies
that manufacture, market, and distribute fluoride products to dentists. The
market is fragmented, and no one company controls or dominates the market. The
Company competes in this market by selling its products through its professional
representatives. The ability to purchase fluorides, prophy paste and angles,
toothbrushes and dental floss becomes a convenience for the dental office, and
to the extent the Company offers a complete line of such products, thereby
reduces the number of suppliers with which each office must deal. The Company
believes this gives it a competitive advantage.
During the 1996 fiscal year, dental pharmaceutical products accounted
for approximately 6% of the Company's revenue.
VICTOR(R) VOICE CHARTING SOFTWARE
In 1995, a project to completely rewrite the Victor software was
completed, and the new product was introduced to the market. An upgrade to this
program was released during 1996. The rewritten software is fully compatible
with Windows 95, and has had its functionality increased to include complete
restorative examination capability, as well as extensive treatment planning and
patient education capability. The software has been integrated with the
Company's dental office management and dental imaging software, to form the
Victor Dental Office integrated software suite, under which name the three
software packages are currently being marketed. Each program may be purchased
individually, in any combination, or as a full suite.
The Victor voice activated software, is intended to be used in the
dental office by dentists and dental hygienists to assist them in the efficient
recording, organizing, maintaining, retrieving and comparing of diagnostic and
restorative information obtained during dental examinations. It therefore
enables dentists to communicate more effectively with their patients and
insurance carriers and reduces their exposure to malpractice claims resulting
from incomplete record-keeping. The use of the Victor system assists dentists in
meeting the American Dental Association's guidelines which recommend that a
periodontal evaluation for every patient be done at least annually, but
preferably biannually, to reduce tooth loss and prevent or reduce malpractice
claims.
The Victor system was the first voice operated comprehensive dental
examination, diagnosis and presentation aid introduced to the dental profession.
It is easily transportable within the dental office to different examination
areas. The Windows version of the software includes highly sophisticated speech
recognition technology, allowing the practitioner to speak continuously, rather
than having to pause between each word spoken, as in the original version. This
permits data to be input faster, more completely, and more accurately. Using the
Victor system, professionals can perform a complete dental exam unassisted and
hands free, permitting the clinician to maintain sterility. Also, it frees up
the time of a hygienist or assistant who would otherwise be required to
facilitate the recording of data. The traditional periodontal examination
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process, which generally consists of recording up to eight hundred separate
items, has been difficult for dentists because it is complicated and
time-consuming. The easy-to-read computer screen and multi-color charts
generated by the Victor system reduce the time involved by assisting the dental
professional in making a diagnosis, and presenting a record of the timing and
scope of the examination. The failure to diagnose, adequately treat, or
appropriately refer the periodontal patient, has been the greatest source of
malpractice lawsuits against dentists during the last ten years. The completed
charts printed by the Victor system can be used to provide dental specialists
and third parties, such as insurance companies, with accurate, detailed
information. The Victor system can store virtually unlimited numbers of reports
and examinations for future reference, periodic updating, and comparative
analysis. The Victor system's ability to compare current data against previous
examinations is crucial, as it automatically and clearly alerts clinicians and
patients to worsening conditions as well as clinical improvement. Through
graphic illustration, the Victor system enables the patient to better understand
the diagnosis and more readily accept the need for treatment. Furthermore, the
Victor system facilitates increased communication between the doctor and patient
regarding the nature of the diagnosis and the recommended treatment course, and
enables both of them to better monitor the effects of treatment over time.
Patient motivation is heightened through the easily understood graphic
presentation of treatment results.
The Company began marketing of the Victor system in January 1991. Prior
to October 31, 1992, the Victor system was distributed by the Company pursuant
to the terms of a joint venture agreement between the Company's wholly-owned
subsidiary, PDT Computer Associates, Inc. and Avanti Computer Associates, Inc.
The joint venture was dissolved in October, 1992 and the Company acquired
exclusive rights to manufacture and market the system. The Company now has only
a royalty obligation to the principals of the original joint venture partner.
In fiscal 1996, Victor system and software sales made up approximately
5% of the Company's total revenues.
PRACTICE MANAGEMENT SOFTWARE
The Company completed negotiations in 1993 whereby its wholly-owned
subsidiary, PDT Byte, Inc. would enter into the PerfectByte Limited Partnership
with PerfectByte, Inc. PerfectByte, Inc. had been marketing a proprietary
computerized management system named PerfectByte(R) to dental offices for
several years. The partnership has subsequently completed the development of a
new practice management program which utilizes Microsoft Windows 95 and
significantly expands the functionality of the original PerfectByte program.
Initial installations of PerfectByte for Windows were made in 1994. Incremental
improvements and upgraded versions of the program have been shipped to users
during 1995 and 1996, including a major rewrite of the patient scheduling
module. As indicated previously, the practice management system has been
integrated with the Victor voice charting system, and is being sold as part of
the Victor Dental Office software suite.
During 1996, the Company determined that distribution of its software
products through independent resellers was in its best interest. These Value
Added Resellers (VARs) install hardware if the sale involves a turnkey system,
provide on-site training of the customer in the proper system operation, and
other services as requested by the customer. VARs typically purchase and resell
their own hardware. In those instances where the Company purchases the hardware
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portion of the system, it is from well established vendors, normally Hewlett
Packard. Such equipment is available from numerous computer suppliers, and the
Company has not experienced any difficulties in obtaining adequate supplies of
any components or materials.
OTHER PRODUCTS
PRISM(TM) INTRA-ORAL CAMERA
The Prism is the Company's second generation intra-oral camera,
introduced in May of 1994. The Prism is a video camera system that shows, at
over 25x magnification, the exact condition of the mouth, in color, on a high
resolution monitor, for viewing by the doctor and the patient. It produces hard
copy, full-color pictures to file, for take home or to send to the patient's
insurance company. It is used to increase case acceptance and to expedite
insurance payment.
Currently, the Company considers the market for intra-oral cameras to be
unsatisfactory due to intense price competition. While the Company has not
withdrawn from the intraoral camera market, it has maintained camera prices at
levels at which it can make a profit. This has resulted in a significant
decrease in the number of camera units sold by the Company in 1996.
PERIODONTAL PROBES
The Perio-Probe(TM) and the patented PDT Sensor(TM) Probe are disposable
diagnostic dental instruments, used in the dental office to examine patients for
indicators of periodontal disease. The PDT Sensor Probe differs from the Perio
Probe in that it has a sensing mechanism built into it which allows the user to
control the amount of pressure used during periodontal exams for more accurate
results. This is the first time dental professionals have had an instrument that
can provide a pre-determined amount of force without utilizing complicated and
expensive electronic instruments.
The probes are flexible dental instruments designed to be used with the
Company's other periodontal exam products to provide easier, less painful and
more accurate measurement of subgingival conditions. The probes are designed to
be disposable, but may be autoclaved (sterilized) for multiple uses. The Perio
Probes and the PDT Sensor Probes are molded for the Company by a local vendor
who uses tooling owned by the Company. The probes are made from readily
available materials. Precision markings are applied by the Company at its
manufacturing facilities in Arkansas. The Company has not experienced any
difficulties in obtaining materials for the probes, and does not anticipate any
such difficulty in the future.
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ROTA-POINTS(TM)
The Rota-point a flexible, non-splintering interdental cleaner and
stimulator. Rota-points are used interproximally to remove both debris and
dental plaque from the surfaces of teeth. This area (between the teeth) is the
most difficult area to clean properly. The mild surface texture and physical
design of the Rota-points make them an ideal product to use with Rota-dent to
help maintain a healthy mouth. Wooden toothpicks can damage gum tissue because
of their awkward shape and the possibility of breaking and splintering.
Since bleeding gums are not healthy, patients can be instructed to watch
for signs of bleeding on the white surface of the Rota-point. If this occurs,
the bleeding area may need more attention. Rota-points are convenient, require
less manual dexterity than floss, clean larger interproximal areas than many
interdental type cleaners, and effectively massage and stimulate the gums. Each
Rota-dent kit contains a package of Rota-points, which are sold individually.
PERIOCHECK(R)
The Periocheck Enzyme Activity Test Kit provides the dental professional
with an accurate and economic chairside test for use in monitoring the outcome
of periodontal therapy. The test measures the activity level of patient's
neutral protease enzymes in gingival crevicular fluid. This family of enzymes,
which include collagenase and elastase, accounts for most of the tissue
degradation observed in periodontal disease. Up to seven gingival sites may be
tested with a single patient test packet. The easy-to-read results are available
in minutes during the patient's office visit eliminating any need to send
samples to an outside lab for analysis. Positive and negative controls are
included with each test kit to increase confidence that the results are valid.
Periocheck is the first test approved by the US Food & Drug
Administration for use in monitoring the periodontal disease process.
Eye-readable test results are intended to assist in the treatment
decision-making process by indicating whether a patient is improving or not
responding to the selected therapy.
DEVELOPMENT COSTS
The Company incurred $542,000 of product development expense in 1996 as
compared to $470,000 in 1995. The Company from time to time considers the
development and introduction, whether alone or with others, of other
professional and consumer dental products. The Company has applied for, and
currently has pending, several additional applications for patents on additional
products or product improvements. The Company cannot predict whether any
additional products will be developed or introduced, or patents issued, as a
result of these efforts.
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SALES AND MARKETING
The Company believes that the market for dental instruments and consumer
products intended for home use for oral hygiene maintenance is an expanding
market, attributable in large part to a shift in focus by the general dentist
from the eradication of tooth decay to the placing of a greater emphasis on the
prevention and treatment of gingivitis (early stages of periodontal disease).
Management believes that the Company has positioned itself to capitalize on this
shift through sales of the Rota-dent and other specialty dental products, which
it markets exclusively through dental offices.
The Company maintains a full-service printing facility and audio-video
production studio to design and produce a variety of educational, promotional
and marketing materials about the Company's products for use by the dentist and
his patients.
The increasing awareness of the impact of periodontal disease, among
consumers and dental professionals alike, as well as the wide and varied extent
of the disease (which industry figures suggest affects upward of 75% of the
American adult population), should lead to an expanding marketplace for the
Company's products. With the current professional and consumer focus on "soft
tissue" (gums) and periodontal disease, the Company believes that it is in an
advantageous position to supply dental professionals with the high quality and
effective specialty instruments and equipment necessary to provide more
specialized services to patients.
The Company expects to continue the expansion of its field sales force
through 1997. The focus of this expansion is to provide greater territorial
coverage, which management believes is the most effective way to increase the
penetration of the Company's products in dental offices across the nation.
Customers in geographic areas not covered by a field sales representative are
served over the telephone by experienced account executives.
No single dental practice accounted for more than 1% of the Company's
total sales revenues in fiscal 1996.
FOREIGN SALES
The Company began exporting its products in 1991. Sales to foreign
distributors represented approximately 5% of the Company's total sales in 1996.
A significant part of this total represented sales to the Company's Canadian
joint venture subsidiary, with most of the balance to independent distributors
in Western Europe. Management believes there is significant potential for
increased sales in the export marketplace, and is actively searching for new
distributors in countries in which the Company's products are not currently
sold.
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REGULATION
Several of the dental products manufactured and marketed by the Company,
the Rota-dent product, the PDT Sensor Sc/RP ultrasonic instrument, fluoride
products and Periocheck are subject to regulation by the Food and Drug
Administration ("FDA") and, in some instances, by foreign governments. Under the
1976 Amendments (the "1976 Amendments") to the Federal Food, Drug and Cosmetic
Act, as amended (the "Act"), and the regulations promulgated thereunder, the
manufacturers of "devices," as such term is defined in Section 201(h) of the
Act, must comply with certain controls that regulate the testing, manufacturing,
packaging and marketing of devices. Under the Act, devices are subject to
different levels of approval requirements, the most comprehensive of which
requires that a clinical evaluation program be conducted before a device
receives pre-market approval by the FDA for commercial distribution. The
Company's products are "Class II" products under this classification system and
did not require clinical evaluation prior to pre-market approval. The Company
has complied with the FDA's applicable qualification procedures for all such
products. Numerous clinical studies were, however, required to obtain the Seal
of Acceptance for the Rota-dent product from the American Dental Association.
As a manufacturer of devices, the Company is also subject to certain
other FDA regulations, and its manufacturing processes and facilities are
subject to continuing review by the FDA to insure compliance with Good
Manufacturing Practices regulations. The Company believes that its manufacturing
and quality control procedures substantially conform to the requirements of FDA
regulations.
WORKING CAPITAL ITEMS
Most components and materials required for the manufacturing process for
the Company's products are readily available on an ongoing basis. The Company
typically maintains a 60-day supply of components and material for its products,
available for either assembly or shipment upon order. Larger supplies of
components having a longer lead time are kept on hand.
BACKLOG
The Company manufactures/purchases all products on the basis of
committed and/or projected orders. The Company normally ships non-personalized
Rota-dent products in one day and personalized products within two to three days
of order receipt. The Company ships other products as requested. The Company
typically has no significant order backlog and has never experienced any
significant delay in shipping orders. The Company does not anticipate any
material delay in meeting foreseeable product requests.
PROPRIETARY RIGHTS
The Company currently holds the following United States patents on the
Rota-dent(R) and other products as indicated:
a. Design patent Registration Number D278,764 issued May 14, 1985, for a
term of 14 years covering the ornamental design for a battery-operated
toothbrush.
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b. Design patent Registration Number D295,801 issued May 24, 1988, for a
term of 14 years covering the ornamental design for a set of brush
heads.
c. Utility patent Registration Number 4,869,277 issued September 26, 1989,
for a term of 17 years covering a brush head and a method and apparatus
for producing the brush head.
d. Design patent Registration Number D306,236 issued February 27, 1990, for
a term of 14 years covering the ornamental design for the long pointed
brush tip.
e. Design Patent Registration Number D309,062 issued July 10, 1990, for
expiration on February 27, 2004, covering the ornamental design for the
short pointed brush tip.
f. Utility patent Registration Number 4,884,849 issued December 5, 1989,
for a term of 17 years covering an apparatus and method of manufacture
of a brush head.
g. Utility patent Registration Number 4827552 issued May 9, 1989, for a
term of 17 years covering a rotary electric toothbrush.
h. Utility patent Registration Number 5,052,419 issued October 1, 1991, for
expiration on September 26, 2006, covering a brush head, and a method
and apparatus for producing the brush head.
i. Utility patent Registration Number 5,072,482 issued December 17, 1991,
for a term of 17 years covering a brush head, apparatus and method for
producing the brush head.
j. Utility patent Registration Number 5,078,158 issued January 7, 1992, for
a term of 17 years covering a brush head with a shaped bottom plate.
k. Utility patent Registration Number 5,090,902 issued February 25, 1992,
for a term of 17 years covering a multi-measurement periodontal probe.
l. Utility patent Registration Number 5,109,563 issued May 5, 1992, for a
term of 17 years covering a soft brush gum stimulator.
m. Utility patent Registration Number 5,112,226 issued May 12, 1992, for a
term of 17 years covering a constant pressure periodontal probe.
14
<PAGE>
n. Utility patent Registration Number 5,146,643 issued September 15, 1992,
for a term of 17 years covering an end brush, and apparatus and method
for producing the end brush.
o. Utility patent Registration Number 5,148,568 issued September 22, 1992,
for a term of 17 years covering an apparatus and method for making an
end brush.
p. Design patent Registration Number D334,842 issued April 20, 1993 for a
term of 14 years covering the ornamental design for a triple head
toothbrush.
q. Utility patent Registration Number 5,205,302 issued April 27, 1993, for
a term of 17 years covering a gum stimulator which has a removable brush
composed of a high-density of soft thin fibers.
r. Utility patent Registration Number 5,234,009 issued August 10, 1993, for
a term of 17 years covering a toothpick having opposite ends adapted to
clean the interstitial spaces and tooth surfaces between adjacent teeth.
s. Utility patent Registration Number 5,276,935 issued January 11, 1994,
for a term of 17 years covering dental brushes impregnated with a
medicament for slow release during brushing.
The Company has also obtained patents or trademarks or has applied for
patents or trademarks under the laws of 28 foreign countries. The Company
believes that the patents issued to it are material to its business and seeks
vigorously to protect its rights against infringement.
The Company owns, or has licensed the rights to, a number of registered
trademarks. Those owned include Rota-dent, Pro-Dentec, Pro-Dentx, PDT Sensor,
STM, Beyond STM, Soft Tissue Management, Professional Relationship Program,
Victor, Pro-Cam and Mobius. Those licensed include PerfectByte, Periocheck and
Biocheck. In addition, the Company has registrations pending on certain other
trade names, and has trademarked the names of all of its other products.
EMPLOYEES
As of December 31, 1996, the Company employed 315 persons full-time, of
whom 168 worked in manufacturing, 103 in sales and marketing, with the balance
in administration and management. None of the Company's employees are
represented by a labor organization, and the Company has never experienced a
work stoppage or interruption due to a labor dispute. Management believes that
relations with its employees are good.
15
<PAGE>
ITEM 2. PROPERTIES
- ------- ----------
The Company owns three buildings in Batesville, Arkansas containing a
total of 49,000 square feet of administration, warehouse and production space.
The building on Harrison Street houses the Company's production facilities for
the Rota-dent product and other products, spaces devoted to product development,
purchasing and an audiovisual production studio. The Company also owns ten acres
of land and a masonry building which has been modified for use as a printing
facility and for the production of its dental pharmaceutical products. An
addition to this facility was completed in 1996. The building housing the
Company's executive offices as well as its marketing, professional consulting,
accounting and administrative staffs was purchased in1994. The building had been
leased and used for the same purpose prior to the purchase. The Company has
outstanding mortgages on the buildings totaling $526,000. The Company believes
that the facilities are adequate for its current production needs and that
additional space, if needed, can be constructed or purchased without materially
affecting operations.
The Company leases space in two buildings in Batesville, Arkansas for a
monthly rental of $3,550. One building is a 12,200 square foot facility in
Batesville, Arkansas, which houses the Company's warehouse and its shipping and
receiving facilities. It is leased for one year beginning July 1, 1996. After
this initial lease term is complete, the Company has four one-year options to
renew the lease. The other building is used as a woodworking facility for
construction of computer system and intraoral camera carts, and is on a
month-to-month lease. The Company believes that these facilities are adequate
for its current needs.
ITEM 3. LEGAL PROCEEDINGS
- ------- -----------------
On June 26, 1995, PDT Image, Inc., (a wholly-owned subsidiary of
Professional Dental Technologies, Inc.) filed a Petition for Declaratory Decree
and Restraining Order against Source- 1 Dental Image, Inc., et al, its partner
in the Pro-Dentec Canada partnership. The partnership is in the business of
distributing the Company's products and software of throughout Canada, as well
as the development and marketing of imaging software. The Company was granted a
Temporary Restraining Order by the Court, and later amended its claim to include
claims of damages for breach of fiduciary duty, fraud, civil conspiracy and
contempt. In July 1995, Source-1 Dental Image, Inc., filed its response and a
Counterclaim for dissolution of the partnership. The lawsuit was tried in the
Chancery Court of Independence County, Arkansas, in September, 1996, and
post-trial briefs were submitted to the Court in November, 1996. In December,
1996, the Company filed a motion to reopen, in order to present newly available
evidence. The Company is currently awaiting the rulings of the Court. Regardless
of the outcome, the Company will continue distributing its products in Canada.
No prediction of the outcome can be reasonably made at this time concerning this
matter, however, the Company does not believe the outcome could adversely affect
its financial position in any material way.
16
<PAGE>
The Company is not aware of any other material litigation involving the
Company or any of its officers or directors.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
17
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
- ------- STOCKHOLDERS MATTERS
-------------------------------------------------
As of December 31, 1996, the Company had 274 holders of record of its
Common Stock. The Company's Common Stock is traded on the American Stock
Exchange Emerging Company Marketplace.
The following are the high and low prices of the Company's Common Stock
as published by the American Stock Exchange Emerging Company Marketplace:
QUARTER ENDED HIGH CLOSE LOW CLOSE
------------- ---------- ---------
January 31, 1995 2 1/4 1 7/8
April 30, 1995 2 1/4 1 9/16
July 31, 1995 1 7/16 1 5/16
October 31, 1995 1 9/16 1 3/8
January 31, 1996 1 1/8 13/16
April 30, 1996 1 1/4 7/8
July 31, 1996 1 1/4 13/16
October 31, 1996 7/8 3/4
In May, 1991, the Company's Registration Statement on Form 10 filed
under the Securities Exchange Act of 1934, as amended, became effective and the
Company thereby became a "reporting Company" subject to the periodic reporting
and other requirements of such Act.
In March of 1992, the Company listed its shares of Common Stock on the
American Stock Exchange Emerging Company Marketplace.
The Company historically has not paid cash dividends on its Common
Stock. While the Company does not currently intend to pay regular cash
dividends, this policy will be reviewed periodically by the Board of Directors,
taking into account, among other things, the Company's earnings and financial
position.
18
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- CONDITION AND RESULTS OF OPERATIONS.
-------------------------------------------------
FISCAL YEARS 1996 AND 1995
RESULTS OF OPERATIONS
In fiscal 1996, net sales totaled $22.0 million, a 7% decrease compared
to net sales of $23.7 million in 1995. The decrease can be attributed primarily
to lower sales of intraoral cameras (by about 82%), due to the decision by
management not to compete at the prevailing price levels in the market, and
lower sales of scalers (by about 26%), due to competition in the market. Foreign
sales amounted to 5% of total sales in 1996 compared to 6% of total sales in
1995. These decreases were partially offset by an increase in sales of
pharmaceutical products amounting to 42%.
The Company's revenues for both 1996 and 1995 were substantially
attributable to sales of Rota-dents and associated accessory products. In fiscal
years 1996 and 1995, revenue from the sale of Rota-dents and accessories
amounted to approximately $16.7 million and $17.2 million respectively. Sales
revenues from equipment (scalers, intraoral cameras and computer systems and
software) amounted to $3.0 million for 1996 and $5.0 million in 1995. Sales of
other products and services were $2.3 million in 1996 and $1.5 million in 1995.
The cost of goods sold in fiscal 1996 was $8.7 million, and in fiscal
1995, $9.6 million. As a percentage of sales, cost of goods was 39.5% in 1996
compared to 40.7% in 1995. The decrease in cost of goods was due to lower sales
revenue, improved operating efficiencies in the production of the Rota-dent and
a favorable shift in product mix due to lower sales of intraoral cameras in
1996. Included in 1996 cost of goods is a writedown of approximately $213,000 of
obsolete and slow moving intraoral camera inventory. There were no such
writedowns of inventory in 1995.
Operating expenses (selling, general, administrative, product
development and royalty) were $12.1 million in 1996 compared to $12.9 million in
fiscal 1995. The decrease in operating expense is attributable to reductions in
selling expense.
Other income and expenses netted to an expense of $834,000 in fiscal
1996 compared to net expense of $957,000 in fiscal 1995. This category of
expense is primarily composed of the Company's pro-rata share of the operating
profit and loss of its non-consolidated subsidiaries and interest
income/expense. The total for 1996 includes writeoffs of investment in PDT
Production Company (scaler) and the PerfectByte Limited Partnership (software)
amounting to $293,000. The 1995 total included the Company's share (99%) of the
loss resulting from the writeoff of a receivable on the books of the Pro-Dentec
Canada Partnership (software), amounting to about $182,000.
19
<PAGE>
On October 3, 1990, PDT Production Company ("PDT Production"), a wholly
owned subsidiary of the Company, entered into a joint venture agreement with
Lyco, Inc., to produce the PDT Sensor Sc/RP Scaler. PDT Production contributed
$1,000 to the joint venture for a 50% partnership interest. Since then, PDT
Production has provided a physical location to house production, engineers and
personnel to operate the production line. On September 30, 1996, PDT Production
acquired its partner's interest in this venture for a purchase price of $20,000.
On October 23, 1996, the assets of PDT Production were assigned for the benefit
of its creditors (who were, at the time of assignment, only the Company and two
companies owned by the former partner). This action terminated the license under
which the PDT Production manufactured the scaler, as well as the obligation of
the Company to pay royalties relating to that product. As of the date of this
report, the assets of PDT Production have been liquidated, and the cash
resulting from the liquidation is in process of being distributed to creditors
by the assignee. The Company has designed and intends to bring to market, in
1997, an alternative scaler product. (See Item 1. Business - PDT
Sensor[TRADEMARK] Sc/RP Scaler).
In January 1993 PDT Byte, Inc. ("Byte"), a wholly owned subsidiary of
the Company, entered into a partnership agreement with PerfectByte, Inc.,
whereby Byte contributed $200,000 for a 50% general partnership interest. Byte
will be allocated 40% of all profits of the partnership until cumulative net
profits exceed $1,246,420, at which time, Byte's allocation will increase to
50%. All losses will be allocated to the partners in proportion to their capital
account balances as of October 31 of each year. As of October 31, 1996, Byte was
allocated 99.5% of the partnership's loss.
As of March 1, 1993, PDT Image, Inc. ("Image"), a wholly owned
subsidiary of the Company, entered into a partnership agreement with Source 1
Dental Image, Inc. ("SDI"). Image contributed the right to distribute the
Company's products in Canada, valued at $100,000, in exchange for a 50% interest
in the partnership. In addition, Image agreed to loan the partnership an amount
not to exceed $300,000 to fund the startup working capital requirements of the
partnership and to complete the development of certain software programs.
Pursuant to the agreement, Image is allocated 50% of net profits, and net losses
will be allocated in proportion to the partners' capital accounts at October 31
of each year. As of October 31, 1996, Image was allocated 99% of the partnership
loss. This partnership is currently the subject of unresolved litigation. (See
Item 3. Legal Proceedings).
20
<PAGE>
During the years ended October 31, 1996 and 1995, the Company had made advances
and investments in these equity affiliates as follows:
1996 1995
---- ----
PROLYCO PRODUCTION COMPANY:
Advances $ 474,408 $ 490,453
Investment 492,194 492,194
Cumulative equity in net loss of affiliate (823,842) (773,329)
Write-down of investment in affiliate (142,760) --
------------ ----------
-- 209,318
PERFECTBYTE LIMITED PARTNERSHIP:
Advances 1,214,104 974,202
Investment 200,000 200,000
Cumulative equity in net loss affiliate (1,262,860) (1,077,492)
Write-down of investment in affiliate (150,000) --
------------ -----------
1,244 96,710
PRO-DENTEC CANADA:
Advances 1,487,716 1,303,079
Investment 100,000 100,000
Cumulative equity in net loss of affiliate (1,264,341) (1,075,145)
Cumulative currency translation adjustment (226) (11,276)
------------ -----------
323,149 316,658
$ 324,393 $ 622,686
============ ==========
The results of these operations do not reflect the income earned by the
Company as sales agent for the products of PerfectByte Limited Partnership and
Pro-Lyco Production Company.
The following is a summary of the condensed aggregate financial position
and results of operations for all equity affiliates as of October 31:
1996 1995
---- ----
Current assets $ 398,961 $ 642,007
Noncurrent assets 31,289 117,880
---------- -----------
Total assets $ 430,250 $ 759,887
=========== ===========
Current and total liabilities $2,669,628 $3,133,863
Ownership equity (deficit) (2,239,378) (2,373,976)
----------- -----------
Total liabilities and equity $ 430,250 $ 759,887
=========== ===========
Sales $2,779,537 $3,070,257
===========
Net loss (456,334) ($1,054,397)
============
Company's proportionate share of loss (425,077) $(1,012,438)
21
<PAGE>
The Company's net income in fiscal 1996 was $258,000, which represents a
$147,000, increase from net income of $111,000 in fiscal 1995. The improvement
in net income resulted from a reduction in cost of goods sold, lower operating
losses in the joint venture affiliates, and a reduction in the effective tax
rate.
CAPITAL RESOURCES AND LIQUIDITY
As of fiscal year end 1996, the Company had total assets of $8.0 million
compared to $7.7 million in 1995. Total liabilities were $3.9 million at the end
of both years. The increase in assets primarily reflects additional investment
in fixed assets during 1996. At October 31, 1996, stockholders' equity had
improved to $4.1 million from $3.8 million at October 31, 1995. The current
ratio increased from 1.6 in 1995 to 1.9 in 1996, reflecting an increase in cash
and certificates of deposit, and a decrease in accounts payable in 1996 compared
to 1995.
During fiscal years 1996 and 1995, net cash provided from operations of
$1,415,000 and $644,000 was used to increase capital items, including
manufacturing space and manufacturing and computer equipment, by $345,000 and
$178,000; to increase its investments in affiliates by $419,000 and $894,000;
and to invest $400,000 in certificates of deposit in 1996.
The Company currently pays a royalty to a foreign company of $3.00 for
each Rota-dent unit sold as part of the cost of obtaining the world-wide rights
to manufacture and distribute the product, under an agreement entered into in
December, 1988. Under the terms of this agreement, the per unit royalty
decreases to $1.50 after an aggregate of $5 million of royalties have been paid.
This royalty reduction should occur late in the 1997 or early in the 1998 fiscal
year.
In October, 1994, the Company signed an agreement to enter into a
business relationship with Aztec Developments Ltd., a British company. During
1995 and 1996, Aztec and the Company completed the development of an automated
periodontal probe. The Company expects to bring this product to market in 1997.
During the 24 month period commencing with the date of the first commercial sale
of the product, the Company is committed to incur marketing expenditures of not
less than $300,000 in connection with the sale of this product, in return for
50% of the profits of the joint venture. The Company does not believe that these
expenditures will adversely impact its liquidity.
The Company has established reserves for potential warranty claims on
its products, and such claims have historically been within management's
expectations.
Additional long-term debt, including obligations under capital leases,
was incurred in the amount of approximately $457,000 during fiscal 1996,
increasing total long term debt to $983,000. The Company believes that it can
retire this debt through its normal cash flow.
22
<PAGE>
The Company defines liquidity as the ability of the Company to generate
adequate amounts of cash to meet the Company's operating needs. The Company has
historically relied on cash provided from operations to meet a majority of its
financial needs and anticipates this will continue in the near term. However,
the Company currently has a revolving line of credit with NBD Bank under which
it can draw up to $3 million, subject to the availability of collateral. This
line of credit is primarily secured by receivables and inventory, and is used to
finance the working capital requirements of the Company. The Company also has
other sources of credit with which it can finance the purchase of fixed assets.
The Company believes these sources of credit combined with cash flow from
operations will be sufficient to meet its foreseeable cash requirements.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------- --------------------------------------------
The required financial statements and supplementary data are included in
a separate section following the signature page as an addendum to this Form
10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ------- ACCOUNTING AND FINANCIAL DISCLOSURE
------------------------------------------------
None.
23
<PAGE>
PART III
--------
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS
- ------- --------------------------------
The directors and executive officers of the Company are as follows:
AGE AT
NAME JANUARY 1, 1997 POSITION
---- --------------- --------
William T. Evans 54 Director, President and
Chief Executive Officer
Robert E. Christian 34 Director, Executive Vice
President and Treasurer
Frank H. Newton, III 56 Chief Operating Officer
J. Robert Lemon 54 Director
Timothy A. Nolan 43 Director
J. Philip Boesel 64 Director
Michael S. Black 46 Director
William T. Evans became President and Chief Executive Officer of the
Company in February, 1996. Previously, he was the Executive Vice President and
Secretary, and has been a Director since 1987. Mr. Evans was an officer of
Dynavest Partnership, the original licensee for the Rota-dent product, from 1981
until its dissolution in December of 1992. He is an officer of Multiway
Associates, a specialty nutrition company, since 1982. Mr. Evans is a cousin of
Timothy A. Nolan, a Director of the Company.
Robert E. Christian became Executive Vice President, Secretary and
Treasurer of the Company in February, 1996. Previously, he was the Senior Vice
President and Treasurer, and has been a Director since 1988. Mr. Christian has
been Vice President of Data Control and Computer Services for Multiway
Associates, a specialty nutrition company, since 1982.
Frank H. Newton, III has been Chief Operating Officer of the Company
since February, 1993. Prior to joining the Company, Mr. Newton was President and
Chief Operating Officer of Scott Instruments Corporation, Denton, Texas, since
1988, and prior to that, President and Chief Executive Officer of AVM Systems,
Inc., Fort Worth, Texas, for six years.
24
<PAGE>
J. Robert Lemon has been a director of the Company since 1987, and
served as its President from 1987 to 1996, when he resigned to devote full time
to other business interests. He continues to work with the Company as a
consultant. Mr. Lemon was an officer of Dynavest Partnership, the original
licensee for the Rota-dent product, from 1981 until its dissolution in December,
1992; and has been an officer of Multiway Associates, a specialty nutrition
company, since 1982.
Timothy A. Nolan has been a director of the Company since 1988. Mr.
Nolan has been Managing Director of Multiway Associates, a specialty nutrition
company, since 1987, and an officer and director of V. M. Nutri, Inc., a
specialty nutrition company, since 1989. He has been employed by V. M. Nutri
since 1982. Mr. Nolan is the cousin of William T. Evans.
J. Philip Boesel, Jr. has been a director of the Company since 1995. He
has been the First Vice President, Investment Banking of Kirkpatrick, Pettis,
Smith, Polian, Inc. since 1991. Kirkpatrick Pettis is a subsidiary of Mutual of
Omaha. Prior to this Mr. Boesel was the President of Robert G. Dickinson & Co.,
a regional investment banking firm, from 1971 through 1990, when the company was
sold. Mr. Boesel is a former Governor of the National Association of Securities
Dealers, and is currently a director of Dealers Lumber Company and Continental
Travel Associates. He holds a B.B.A. degree from the University of Wisconsin,
and a Masters degree in Business from Michigan State University.
Michael S. Black has been a director of the Company since 1996. He is a
partner in the firm of Smith & Black, CPA's and Consultants, since 1988. He
specializes in the areas of corporate information systems and corporate income
tax. Mr. Black holds a B.B.A degrees in Accounting and Finance from the
University of Wisconsin at Whitewater, and is a Certified Public Accountant.
25
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
- -------- ----------------------
The following table sets forth the compensation paid to William T.
Evans, Pro-Dentec's President, and other executive officers whose cash
compensation exceeded $100,000 during the fiscal year ended October 31, 1996.
NAME & BONUS
PRINCIPAL (YEAR OPTIONS/ ALL OTHER
POSITION YEAR SALARY EARNED) SARS (#) COMPENSATION(1)
William T. Evans 1996 $140,000(1) -0- -0- -0-
President 1995 140,000 -0- -0- -0-
1994 140,000 -0- -0- -0-
Frank H. Newton, III 1996 $125,000 -0- -0- -0-
Chief Operating Officer 1995 125,000 -0- -0- -0-
1994 125,000 -0- 100,000 -0-
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
PERCENT OF
TOTAL
OPTIONS/SARS EXERCISE OR
OPTIONS/SARS EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED (#) IN FISCAL YEAR ($/SH.) DATE
- ------------------- ------------ -------------- ----------- ----------
William T. Evans -0- -0- -0- -0-
President
Robert E. Christian -0- -0- -0- -0-
Executive Vice President
Frank H. Newton, III -0- -0- -0- -0-
Chief Operating Officer
________________________
(1) The Company also provides certain of its senior executive officers with
certain personal benefits. The Company believes that the individual and
aggregate amount of such benefits does not exceed, in the case of any named
individual, the lesser of $50,000 or 10% of the reported cash compensation for
such individual.
26
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL AT FISCAL
YEAR-END (#) YEAR-END ($)
SHARES VALUE ------------- -------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISED UNEXERCISABLE
---- ------------ ------- ------------ -------------
<S> <C> <C> <C> <C>
William T. Evans -0- -0- -0- -0-
Robert E. Christian -0- -0- -0- -0-
Frank H. Newton, III -0- -0- -0-/100,000 -0-/-0-
</TABLE>
Mr. Newton was granted stock options totaling 100,000 shares vesting in
lots of 25,000 shares per year with exercise dates beginning on June 13, 1998
and ending on June 13, 2001. The options expire on June 13, 2004.
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company
during or with respect to fiscal 1996, the Company is not aware of any director,
officer or ten percent shareholder that failed to file on a timely basis, as
disclosed in the above referenced Forms, reports required by Section 16 (a)
under the Securities Exchange Act of 1934 during fiscal 1995 or a prior year.
OPTION PLAN
In 1989, the Company adopted the Pro-Dentec Incentive Stock Option Plan
("Plan") pursuant to which stock options ("Options") may be granted to key
employees and other individuals providing services to the Company. Five million
(5,000,000) shares have been reserved for issuance under the Plan, subject to a
limitation that options covering shares in excess of 10% of the outstanding
shares may not be granted during any one year. The Plan is administered by a
committee comprised of three members of the Board of Directors of the Company.
Options must be granted at the fair market value of the covered shares as of the
date of grant. The Plan has been approved by the shareholders. Options may be
granted for a term of up to ten years, but may be terminated upon termination of
employment. In 1996, 805,000 option shares expired or were terminated. As of
October 31, 1996, options relating to a total of 833,500 shares have been
granted to employees and others, of which none were granted in fiscal 1996.
27
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
- -------- AND MANAGEMENT
-----------------------------------------------
The following table sets forth as of January 1, 1997, the beneficial
ownership of the Company's Common Stock, $.01 par value, by all persons known by
the Company to own, beneficially or of record, more than five percent of the
Company's Common Stock, by each director of the Company, and by all officers and
directors as a group:
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
------------------- --------------------- ----------
William T. Evans 5,068,178(2) 35.9%
P. O. Box 4129
Batesville, AR 72503
J. Robert Lemon 4,904,242(3) 34.8%
P. O. Box 4129
Batesville, AR 72503
Robert E. Christian 310,400 2.2%
P. O. Box 4129
Batesville, AR 72503
Timothy A. Nolan 5,603,760(4) 39.7%
P. O. Box 4129
Batesville, AR 72503
Directors and Officers as
a group (4 persons) 10,593,220 75.1%
___________________________
(2) Includes 4,211,360 shares held by a trust principally for the benefit of
Mr. Evans. Also includes 717,000 shares held in trust for the benefit of Mr.
Evans' mother and nephew for which he disclaims beneficial ownership.
(3) Includes 4,093,360 shares held by a trust principally for the benefit of
Mr. Lemon. Also includes 671,000 shares held in trust for the benefit of nephews
and nieces of Mr. Lemon for which he disclaims beneficial ownership.
(4) Includes 310,400 shares held by a trust for the benefit of Mr. Nolan.
Also includes 5,293,360 shares held as trustee, for which Mr. Nolan disclaims
beneficial ownership.
28
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
The Company performs commercial printing services for Life Plus, a
partnership ("Partnership") engaged in the distribution of specialty nutrition
and other health-related products. Messrs. Evans, Christian, Lemon and Nolan,
all of whom are officers and/or directors of the Company, are beneficiaries of
trusts which are partners in the Partnership. Messrs. Lemon and Nolan are
employed by and are officers of the Partnership. During 1996, the Company billed
Life Plus $722,000 for printing services. Commercial market rates are charged
for these printing services, based on arms-length negotiation between the
parties. Payment terms are standard for the trade. Life Plus' payment status is
current with regard to receivables currently owed the Company.
As of October 31, 1996, the Company had made loans to Mr. Christian
totaling $52,378. Payments and interest are current.
29
<PAGE>
PART IV
ITEM 13. FINANCIAL STATEMENTS AND SCHEDULES AND REPORTS
- -------- ON FORM 8-K
----------------------------------------------
1. All Consolidated Financial Statements
(a) Consolidated Balance Sheets at October 31, 1996 and 1995.
(b) Consolidated Statements of Operations for Each of the Years in
the Two-Year Period Ended October 31, 1996.
(c) Consolidated Statements of Stockholder's Equity for Each of the
Years in the Two-Year Period Ended October 31, 1996.
(d) Consolidated Statements of Cash Flows for Each of the Years in
the Two-Year Period Ended October 31, 1996.
(e) Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
(a) Schedule II - Amounts Receivable From Related Parties.
(b) Schedule IX - Short-Term Borrowings.
(c) Schedule X - Supplemental Income Statement Information.
(d) Schedule XI - Computation of Earnings Per Share.
3. Report of Independent Certified Public Accountants.
4. Reports on Form 8-K.
5. Exhibits
EXHIBIT 3(a) - Articles of Incorporation
Incorporated herein by reference to Exhibit 3.1 to the Registration
Statement on Form 10 filed in March 1991 ("1991 Registration Statement")
30
<PAGE>
EXHIBIT 3(b) - Bylaws
------------
Incorporated herein by reference to Exhibit 3.2 to the 1991 Registration
Statement. Bylaws dated December 20, 1995. See Exhibit 3(b)
EXHIBIT 10 - Material Contracts
----------
(i) Stock Incentive Plan. Incorporated herein by reference to
Exhibit 10.1 of the 1991 Registration Statement.
(ii) Secured Credit Agreement with NBD Bank and supporting documents.
Attached herewith.
(iii) Capital Equipment leases with The CIT Group (6). Attached
herewith.
EXHIBIT 21 - Subsidiaries of the Registrant. Attached herewith.
----------
EXHIBIT 27 - Financial Data Schedule
----------
31
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PROFESSIONAL DENTAL TECHNOLOGIES, INC.
Date: January 24, 1997 By: /s/ William T. Evans
------------------------------
William T. Evans
Principal Executive Officer
Date: January 24, 1997 By: /s/ Richard L. Land
------------------------------
Richard L. Land
Principal Accounting Officer
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ J. Robert Lemon By: /s/ Robert E. Christian
------------------------ -------------------------
J. Robert Lemon Robert E. Christian
Director Director
Date: January 24, 1997 Date: January 24, 1997
By: /s/ William T. Evans By: /s/ J. Philip Boesel, Jr.
------------------------- -------------------------
William T. Evans J. Philip Boesel, Jr.
Director Director
Date: January 24, 1997 Date: January 24, 1997
By: /s/ Timothy A. Nolan By: /s/ Michael S. Black
-------------------------- --------------------------
Timothy A. Nolan Michael S. Black
Director Director
Date: January 24, 1997 Date: January 24, 1997
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
Exhibit 3(a) Articles of Incorporation
Incorporated herein by reference to Exhibit
3.1 to the Registration Statement on Form
10 filed in March 1991 ("1991 Registration
Statement")
Exhibit 3(b) Bylaws
Incorporated herein by reference to Exhibit
3.2 to the 1991 Registration Statement.
Bylaws dated December 20, 1995. See Exhibit
3(b).
Exhibit 10 Material Contracts
(i) Stock Incentive Plan. Incorporated
herein by reference to Exhibit 10.1
of the 1991 Registration Statement
(ii) Secured Credit Agreement with NBD
Bank and supporting documents.
(iii) Capital Equipment leases with the
CIT Group (6).
Exhibit 21 Subsidiaries of the Registrant.
Exhibit 27 Financial Data Schedule
SECURED CREDIT AGREEMENT
(ACCOUNTS RECEIVABLE AND INVENTORY)
Date: JUNE 25, 1996
NBD BANK ("Lender") and Professional Dental Technologies, Inc., d/b/a
Pro-Dentec, d/b/a Prism, d/b/a Rota Point and Professional Dental Hygienists,
Inc., d/b/a Professional Dental Technologies and Services (collectively the
"Borrower") agree to the following:
1. LINE OF CREDIT. Lender, in its sole discretion, will lend to
Borrower, on the terms described in this Agreement, up to the principal sum of:
(a) up to 75% of the net amount of "eligible" Receivables (as determined in
accordance with Paragraph 8 below); and (b) up to 25% of the lesser of the
cost or market value, or whatever other reasonable valuation is set by Lender,
of "eligible" Inventory (as determined in accordance with Paragraph 8 below).
The maximum principal amount to be advanced to Borrower under this line of
credit will not exceed $3,000,000.00 at any one time outstanding, of which the
maximum principal amount to be advanced against the security of eligible
Inventory will not exceed $ 400,000,00.
Lender shall not be obligated to lend or relend to Borrower at any
time under this line of credit; each borrowing or reborrowing which is made
under this line of credit will be made at the option of, and in the sole
discretion, of Lender. Without in any way limiting the generality of the
foregoing, Lender may, at any time and from time to time, in its sole
discretion, change or reduce the percentage advance rates against eligible
Receivables and eligible Inventory set forth in the immediately preceding
paragraph.
2. RATE OF INTEREST. The rate of interest to be charged on all advances,
whether under this Agreement, any supplement, or otherwise ("Interest Rate"),
will be 1.50 percentage points per annum higher than the prime per annum rate
of interest adjusted on a daily basis, based on such rates as announced,
published or determined by Lender (the "Prime Rate") and after maturity of the
obligations (whether upon demand for payment, default under this Agreement,
expiration of term, termination, acceleration or otherwise), the Interest Rate
will be 3.50 percentage points per annum higher than the Prime Rate. However, in
no event shall the Interest Rate be more than the highest rate permitted by law.
For purposes hereof, the "Prime Rate" is that rate of interest which the Lender
shall from time to time announce to be the Lender's Prime Rate. The Prime Rate
is set by the Lender based upon various factors, including its costs and desired
(THIS AGREEMENT CONTAINS BOTH A GRANT OF A SECURITY INTEREST IN RECEIVABLES AND
INVENTORY AND A PROMISE TO MAKE PAYMENT OF FUNDS BORROWED.)
<PAGE>
return, general economic conditions and other factors and is used as a reference
point for pricing some loans. Lender may make loans at, above or below the Prime
Rate. Any change in the Prime Rate shall immediately effect a change in the rate
of interest payable hereunder. Such interest will be payable to Lender at the
close of each month, and Lender may charge the amount of such interest to
Borrower's account at that time. Interest charged on all advances shall be
calculated on the basis of a year of 360 days for the actual number of days
elapsed in a month, using the net debit balance owing to Lender at the close of
each day of each respective month. After allowing 3 business days for collection
of checks and other instruments (and subject to final collection), Lender will
credit to Borrower's account the net amount of cash received by Lender.
3. GRANT OF SECURITY: RECEIVABLES AND INVENTORY.
(a) As security for all advances from Lender, and for all other
obligations as more particularly described below in Paragraph 5,
chargeable to Borrower's account, Borrower hereby grants Lender a first
lien and security interest in: (1) all Receivables now or hereafter owned
by Borrower; and (2) all Inventory now or hereafter owned by Borrower and
wherever located.
(b) The term "Receivables" means all obligations of any kind at any
time owing to Borrower, and whether now existing or arising in the
future. Receivables include the following classifications of collateral
under the Uniform Commercial Code: accounts, accounts receivable,
contract rights, causes of action (including, without limitation, causes
of action and recoveries under U.S.C. Sections 542-550 and 553), general
intangibles (including all state and federal tax refunds, pension
refunds, together with the goodwill of the business connected with the
use of, and symbolized by, any of the foregoing, all trade secrets,
patent, trademark and copyright royalties or like payments, proceeds of
condemnation, awards, proceeds of judgments and proceeds of fire and
other property insurance, such as business interruption insurance, and
all certificates of public convenience and necessity, and all proceeds of
insurance applicable to the Receivables or returned goods), chattel
paper, documents, instruments, deposits, and all proceeds of the
foregoing, as well as all security which Borrower has for any of these
Receivables, and all of Borrower's rights to any goods or other property
sold or leased which may be represented by such Receivables.
(c) The term "Inventory" includes all goods intended for sale or
lease by Borrower, or to be furnished by Borrower under contracts of sale
or service, all raw materials, goods in process, finished goods,
materials and supplies of every nature used or useable in connection with
the manufacture, packing, shipping, advertising, selling, leasing or
furnishing of such goods, all documents evidencing or representing the
same, wherever located, and all proceeds of such collateral, including
insurance proceeds. Lender's security interest in Inventory will
continue through all stages of manufacture and will, without further act,
attach to raw materials, to goods in process, to the finished goods, to
the Receivables or other proceeds resulting from the sale or other
disposition of Inventory, to all such Inventory as may be returned to
Borrower by its customers, and all proceeds of insurance arising from
loss or damage to any Inventory.
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<PAGE>
(d) The Inventory and Receivables shall be security for all of
Borrower's obligations to Lender, including, but not limited to,
borrowings under this Agreement and for all other obligations chargeable
to Borrower's account under this Agreement and other agreements Borrower
has or may have with Lender. Lender may also have other collateral for
the Borrower's obligations. Until all such obligations have been fully
paid or satisfied, Lender's security interest will continue in full force
and effect.
4. GRANT OF SECURITY: BUSINESS RECORDS. In addition to Lender's other
security, Borrower hereby grants Lender a lease and first lien and security
interest in all of Borrower's books of accounts, ledgers, computer software,
computer printouts and other computerized records and cabinets in which there
are reflected or maintained the Receivables in which Lender has a security
interest, or which relate to any other security Lender may hold from Borrower
and all supporting evidence and documents relating to such security in the form
of written applications, credit information, account cards, payment records,
correspondence, delivery and installation certificates, invoice copies, delivery
receipts, notes and other evidences of indebtedness, insurance certificates and
the like. For convenience, these documents are called "Business Records." Lender
and its representatives shall, at all reasonable times during business hours, be
entitled to free and undisputed access to such Business Records, and to make
copies and extracts from such Business Records. All future Business Records
which Borrower may acquire or develop concerning Receivables and other security
for the advances shall also and without further act be subject to the provisions
of this Agreement, and Lender shall have a lease and first lien and security
interest in them.
5. PAYMENT AND OBLIGATIONS. ALL OF BORROWER'S OBLIGATIONS TO LENDER,
WHETHER ARISING UNDER THIS AGREEMENT, ANY TERM NOTE OR OTHERWISE, SHALL BE
PAYABLE UPON DEMAND. Borrower's obligations to Lender include the principal on
all loans and advances, whether under this Agreement, any Term Note(s) or
otherwise, including advances under the line of credit in excess of the limits
set forth in Paragraph 1 above, the interest accrued and unpaid, all liabilities
acquired by purchase by Lender, by assignment or participation, and all other
obligations, however arising, whenever arising, however evidenced, and whether
absolute or contingent, due or to become due, including, without limitation, all
obligations of Borrower arising under any guaranty agreements. Furthermore, all
reasonable costs and expenses incurred by Lender or its agents in connection
with this Agreement, including the preparation and review of this Agreement and
all related agreements and documents, a collateral monitoring fee, of $1,500.00
- 3 -
<PAGE>
per quarter payable in arrears, each January 1st , April 1st , July 1st and
October 1st, and all other obligations to Lender, shall be part of Borrower's
obligations and secured by the Receivables and Inventory and other collateral
security granted to Lender. Such costs and expenses include reasonable
attorneys' fees and court costs incurred by Lender in obtaining legal advice
regarding this Agreement or in enforcing payment of Borrower's obligations or to
obtain payment of any of the Receivables or to perfect, renew or extend Lender's
security interest or to defend any action or proceeding related to this
Agreement or any Receivables, Inventory or other collateral, including any costs
and expenses of any proceeding in which Lender is involved with Borrower or any
customer of Borrower's, such as the costs and fees of lifting the automatic stay
or participating in any bankruptcy proceeding, the costs of preserving and
liquidating the Receivables and Inventory or other collateral security and the
amount of all unpaid taxes, fees, assessments and similar charges owing by
Borrower to any governmental authority, but only with respect to the
Receivables, Inventory or other collateral and not otherwise, and which Lender
is required to pay or deposit for Borrower's account.
6. WARRANTIES AND COVENANTS RE: RECEIVABLES. Borrower warrants to Lender
that all existing or future Receivables at the time of their assignment to
Lender, will be valid, genuine and existing obligations created by sale and
actual delivery by Borrower of goods or other property or through Borrower
performing services or furnishing other sufficient consideration to its account
debtors and other obligors, in the regular course of Borrower's business. These
account debtors and other obligors are hereafter referred to as the "Customer."
Borrower's Receivables will be free of all security interests, liens and
encumbrances, except in Lender's favor, and shall be unconditionally owing to
Borrower without any defense, offset or counterclaim. All of the shipping and
delivery receipts and other documents to be given to Lender by Borrower with
respect to the Receivables will be genuine. If any of these Receivables arise
out of contracts with the United States or any of its departments, agencies or
instrumentalities, Borrower shall advise Lender of this fact. Borrower shall
execute any and all documents required by law in order to assign such
Receivables and the proceeds thereof to Lender and give proper notice of the
assignment in accordance with the requirements of the Federal Assignment of
Claims Act, as amended, or any similar law now in force or passed in the future.
If there are any disputes with Borrower's Customers, Borrower will notify Lender
promptly and settle with them at no expense or detriment to Lender.
7. WARRANTIES AND COVENANTS RE: INVENTORY.
(a) Borrower jointly and severally warrants that all Inventory is
and shall be kept by Borrower at the following locations:
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<PAGE>
633 Lawrence, 2410 Harrison, 1210 Batesville and 301 N. Main,
Batesville, Arkansas 75201
and shall not (without prior written approval of Lender) be removed from such
location(s) except for purposes of sale in the ordinary course of business.
(b) All Inventory of Borrower will be free of all security
interests, liens and encumbrances, or consignment arrangements or
agreements, except those in favor of Lender and those consented to in
writing by Lender.
(c) Borrower shall perform any and all steps reasonably requested
by Lender to protect, preserve and further perfect Lender's security
interest in the Inventory. Such steps shall include leasing warehouses
to Lender or its designee, transferring Inventory to such warehouses or
to public warehouses, placing and maintaining signs, appointing
custodians, and executing and filing financing or continuation
statements in form and substance satisfactory to Lender. If any
Inventory is in the possession or control of any of Borrower's agents or
processors, Borrower shall notify them of Lender's security interest,
and upon Lender's request, instruct them to hold all such Inventory for
Lender's account and subject to Lender's instructions.
(d) Lender may, in its discretion, at any time, pursuant to the
power of attorney granted in this Agreement, notify Borrower's agents,
processors or any warehousemen who have possession of any Inventory, of
Lender's security interest, and that all such Inventory must be held for
Lender's account and subject to its instructions.
8. ELIGIBLE RECEIVABLES AND INVENTORY.
(a) The determination of whether Receivables or Inventory are
"eligible" is one that will be made entirely by Lender, but in no event
shall Receivables that are more than 90 days old (based on the billing
date) or 30 days old (based on the billing date) for COD Receivables, be
eligible.
(b) If any of the following things happen, then Lender may, in
addition to its other rights, reclassify all of the Receivables of a
Customer as ineligible without in any way affecting Lender's security in
such Receivables: (i) if any warranty is breached as to any Receivable
or as to the goods and services which gave rise to any Receivable; (ii)
if 50% or more of the total Receivables from a Customer are either more
than 90 days old (based on the billing date) or more than 30 days old
(based on billing date) for COD Receivables; (iii) if the Customer
disputes liability on any Receivable; (iv) if the Customer makes a claim
with respect to liability; (v) if the Customer files, or has filed
against it, a petition for bankruptcy, reorganization or any other type
of relief under any insolvency laws; (vi) if the Customer makes an
assignment for the benefit of creditors, or seeks a composition with
creditors; (vii) if the Customer becomes insolvent, or fails, suspends,
or goes out of business.
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<PAGE>
(c) Eligible Inventory includes only those portions of the
Inventory listed on schedules provided to Lender by Borrower which
Lender may from time to time classify as eligible.
9. RECORDS AND REPORTS.
(a) Borrower shall maintain adequate stock records of its
Inventory, including perpetual inventories. Borrower shall also make a
physical listing of all Inventory, wherever located, at least every
twelve months, and whenever requested by Lender, and a copy of each such
physical listing shall be supplied to Lender.
(b) Upon Lender's request, Borrower shall furnish schedules
describing all Receivables created or acquired by Borrower, and
confirming Lender's security interests therein; however, Lender's rights
will not be impaired if Borrower fails to do so.
(c) All items making up proof of delivery of goods and services
rendered by Borrower to Customers, and copies of all invoices to
Borrower's Customers will be held in trust for Lender's benefit, and
Borrower shall promptly furnish the originals or copies of the same at
any time Lender requires them.
(d) In addition, at Lender's request, Borrower will periodically
furnish written reports detailing its Inventory and containing such
information on Inventory as Lender may reasonably specify. Lender shall
further have the right, at all times, to have access to and to inspect
Borrower's Inventory.
(e) Lender may also inspect, audit and make abstracts from
Borrower's Business Records and any other records, files and books of
account, and Borrower shall furnish upon Lender's request, at reasonable
intervals, statements showing Borrower's financial condition and the
results of its operations.
(f) Borrower shall also promptly provide Lender with copies of
all of Borrower's future audited, reviewed or compiled financial
statements, and statements or reports Borrower is required to file with
shareholders or any governmental agencies, such as the Securities and
Exchange Commission, and any other documents or information Lender may
reasonably request.
10. INSURANCE. Borrower shall insure the Inventory for Lender's benefit
against loss or damage by fire, theft, burglary, pilferage, loss in transit and
such other hazards as Lender may specify, in amounts and under policies and by
insurers reasonably acceptable to Lender, and all premiums shall be paid by
Borrower when due and the policies or certified copies of such policies
delivered to Lender. If Borrower fails to do so, Lender may procure such
insurance and charge the cost to Borrower's account. No cancellation of such
insurance or material change in the terms of any policy shall be made without
the insurance carrier giving Lender at least 30 days' prior written notice. In
the event of any casualty to the Inventory which is covered by insurance,
Borrower authorizes Lender to settle any claim or proceed to suit and judgment
for all insurance proceeds arising out of the casualty to the Inventory, and
upon receipt of payment of such proceeds Lender, at its option, may apply all
payments to the obligations in any order Lender determines or to the restoration
or replacement of the Inventory.
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<PAGE>
11. VERIFICATION AND COLLECTION OF RECEIVABLES. Lender may verify any
Receivable at any time in any reasonable manner, including written or telephone
requests for verification of Receivables from Customers, and Borrower shall help
Lender do so. Lender at any time may notify Borrower's Customers that Lender has
a security interest in the Receivables, and collect them directly in Lender's
own name. Unless and until Lender so notifies such Customers, Borrower will
collect the Receivables as a trustee for Lender under an express trust for
Lender's benefit. All full or partial payments of any Receivables made directly
to Borrower or that otherwise come into Borrower's possession shall also be
received by Borrower in trust, and unless Borrower is instructed otherwise,
Borrower shall deliver all payments to Lender in their original form. Similarly,
any goods which are returned to Borrower by its Customers or which Borrower
otherwise recovers shall also be received in trust for Lender. Borrower shall
advise Lender promptly of any such returned goods, and unless Lender instructs
Borrower to deliver them to Lender, Borrower shall sell them for Lender, and the
Receivables so created shall be part of Lender's security. After Lender has
notified any Customer, Lender shall have the right, without Borrower's
participation, approval or notice, to settle any disputes between such Customer
and Borrower directly with the Customer for any amounts and upon such terms as
Lender considers advisable. Further, upon request of Lender at any time,
Borrower agrees to notify such Customers and indicate on all billings that the
Receivables are payable to Lender.
12. SALES OF INVENTORY. If Borrower sells Inventory for cash, all full
and partial payments shall immediately be delivered to Lender in their original
form, and if Borrower sells Inventory on credit, Borrower shall confirm the
assignment to Lender of the resulting Receivables and Lender's security interest
therein pursuant to this Agreement.
13. APPOINTMENT OF AGENT. After the occurrence of any of the events of
default set forth in Paragraph 14 and upon the declaration by Lender of such
default, to protect Lender's interest in the Receivables, Inventory and other
collateral, Borrower appoints Lender as Borrower' s attorney-in-fact, or any
person or entity that Lender from time to time appoints to act in this capacity.
Such appointment shall be effective immediately upon declaration of default by
Lender. As Borrower's attorney-in-fact, Lender shall have the power to endorse
Borrower's name on checks, notes, acceptances, drafts, or other forms of payment
or security that may come into Lender's possession. Such attorney may also sign
Borrower's name on any invoices or bills of lading relating to any Receivables
or Inventory or on any tax refund checks or drafts, or on drafts against the
Customers, on schedules and confirmations of assignments of Receivables or
Inventory, on notices of assignments, financing statements under the Uniform
Commercial Code and other public records, on verifications of accounts and on
notices to Customers. Lender may also notify the post office authorities to
change the address for delivery of Borrower's mail to an address designated by
Lender. Lender may receive, open and dispose of all mail addressed to Borrower.
Lender may send requests for verifications of accounts to Customers, and do all
other things necessary to carry out this Agreement. Borrower ratifies and
confirms all acts of the attorney. Neither the attorney-in-fact, if a separate
person or entity is designated, nor Lender will be liable for any act or
omission, or any error in judgment or mistake of fact or law. These powers
granted to Lender and the attorney are coupled with an interest, and cannot be
revoked by Borrower so long as Borrower is indebted to Lender or Lender has a
security interest in any Receivable or other collateral.
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<PAGE>
14. DEFAULTS. If any of the following things happen, Borrower shall be
in default of this Agreement and Lender shall have the remedies provided below
in Paragraph 15:
(a) if, after demand, Borrower fails to make any payment required
of it under this Agreement, or any other note or agreement with Lender,
or, if no demand has been made, if Borrower fails to make any payment
required of it under this Agreement, or any other note or agreement with
Lender when and as due;
(b) if Borrower defaults under this Agreement or any other
agreement or note with Lender, other than a default under Paragraph
14(a) above;
(c) if Borrower or any Guarantor of the amounts due under this
Agreement ("Guarantor") becomes insolvent or generally unable to meet
its debts as they become due, or fails, suspends, or goes out of
business;
(d) if Borrower's Tangible Net Worth (as defined below) is ever
less than $ 2,000,000.00. For the purposes of this provision, Tangible
Net Worth means total assets less intangible assets, prepaids,
investments in affiliates, advances to officers, employees, and
affiliates, and total liabilities all as determined by the Lender.
Intangible assets include goodwill, patents, copyrights, mailing lists,
catalogs, trademarks, bond discounts and underwriting expenses,
organization expenses, and all other intangibles;
(e) if Borrower or any Guarantor suffers a material loss of any
of its property or assets that is not covered by insurance satisfactory
to Lender;
(f) if a trustee, receiver or custodian is appointed over all or
substantially all of Borrower's or any Guarantor's property;
(g) if any proceeding in bankruptcy, insolvency or reorganization
is instituted by or against Borrower or any Guarantor;
(h) if Borrower or any Guarantor makes an assignment for the
benefit of creditors or a composition with any of its creditors;
(i) if the Borrower makes additional net investments in, or
advances to, its nonconsolidated joint ventures exceeding $400,000 in
the aggregate during a period commencing with the execution of this
agreement and ending on the Borrower's current fiscal year, and
thereafter if the Borrower makes any additional net investment in, or
advance to, its nonconsolidated joint ventures without the Lender's
prior consent;
(j) if the Borrower guaranties or otherwise becomes or remains
secondarily liable on the undertaking of another, including any
affiliate of Borrower but excluding endorsement of drafts for deposit
and collection in the ordinary course of business; or
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<PAGE>
(k) if the Borrower or any Guarantor defaults under the terms of
any agreement or instrument relating to any debt for borrowed money,
other than a default under Paragraphs 14 (a) or 14 (b), such that the
creditor declares the debt due before its maturity.
NOTWITHSTANDING THE FOREGOING, LENDER'S RIGHT TO DEMAND PAYMENT SHALL NOT BE
CONDITIONED UPON A DEFAULT UNDER THIS AGREEMENT OR ANY OTHER AGREEMENT.
15. RIGHTS AND REMEDIES.
(a) Lender shall have the following rights and remedies in the
event of the occurrence of any of the defaults described in Paragraph 14
above: all of the rights and remedies of a secured party under the
Uniform Commercial Code, including the right to sell and deliver any and
all of the Receivables and Inventory Lender may hold at public or
private sale, for cash, for credit or otherwise, and upon such prices
and terms as Lender deems advisable. Borrower acknowledges that, unless
the circumstances dictate that shorter notice is reasonable, at least 15
days' prior notice of any such sale or other disposition of the
Receivables or Inventory shall be reasonable notice, and that such
notice may be given to Borrower at its address specified below, or at
such other address as it provides to Lender in writing from time to
time. Such notice may be written, by telegram, telex or other medium of
communication, or may be personally delivered by Lender. If the sale of
the Receivables or Inventory is public, Lender may purchase at the sale
and shall have all rights of a good faith purchaser for value. Lender
shall also have the right to collect the Receivables by direct action
against Borrower's Customers making such settlements or compromises with
them as it deems advisable. Lender may also take physical possession of
any Inventory at any time or times, and maintain such possession on
Borrower's premises. Lender may also remove such Inventory or any part
thereof to such other places as it may wish. If Lender exercises its
right to take possession of Inventory, Borrower shall, on Lender's
request, assemble it and make it available to Lender at a place
reasonably convenient to Lender. In addition to all of the rights and
remedies set forth in this Agreement, Lender will have the right
forthwith or at any time thereafter to remove from Borrower's premises
all Business Records and Lender may keep and retain the Business Records
in its possession until all present and future indebtedness and
obligations of whatever nature owing by Borrower to Lender shall have
been fully paid and discharged. The removal of such Business Records
shall not prevent Borrower from being afforded access to them, during
regular business hours, at the place or places to which they have been
moved by Lender, for the purpose of examining and auditing them and
making written excerpts from such Business Records.
(b) The proceeds of the sale or collection of the Receivables and
Inventory shall, at Lender's option, first be applied to all costs and
expenses of sale or collection, including reasonable attorneys' fees,
and secondly to the payment, in whatever order Lender elects, of all
obligations chargeable to Borrower.
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(c) Subject to the provisions of applicable law, Lender shall
return any surplus to Borrower, and Borrower shall remain liable to
Lender for any deficiency.
(d) All sums at any time standing to Borrower's credit on
Lender's books, and all of Borrower's property at any time in Lender's
possession, custody or control or upon which Lender has a lien or
security interest may be held by Lender as security for all obligations
due Lender from Borrower, and may be offset against such obligations.
(e) In any bankruptcy proceeding, including one for
reorganization, Borrower agrees that Lender shall have a right of first
refusal to provide financing in such proceeding on such basis as to
priority and security as Lender elects. Borrower acknowledges, however,
that this Agreement and all supplements thereto are financial
accommodations for its benefit, and that Lender has no obligation to
finance Borrower or any trustee in any such bankruptcy proceeding.
16. NO MARSHALLING. Borrower, on its own behalf and on behalf of its
successors and assigns hereby expressly waives all rights, if any, to require a
marshalling of assets by Lender or to require that Lender first resort to some
or any portion of any collateral securing Borrower's obligations before
foreclosing upon, selling or otherwise realizing on any other portion thereof
17. TERM AND TERMINATION. Unless there is a sooner demand for payment,
this Agreement shall have an initial term of three years from the date set forth
above. This Agreement shall be automatically renewed for successive periods of
one year unless terminated as provided below. Even if this Agreement is
automatically renewed, the obligations due Lender under this Agreement will
still be payable on demand. Lender may terminate this Agreement at any time, and
Borrower may so terminate it only on the anniversary of the Agreement in any
year upon sixty (60) days prior written notice to Lender. However, if Borrower
chooses to terminate the Agreement and to pay Lender a prepayment premium in
addition to the then principal, accrued interest and any other obligations due
Lender, Borrower may terminate this Agreement at any time. The Borrower shall be
obligated to pay a prepayment premium if Borrower makes a prepayment of all or
substantially all (more than 50%) of the principal then outstanding, accrued
interest and other obligations due Lender by Borrower at any time other than the
annual anniversary of this Agreement. The prepayment premium previously referred
to shall be equal to 2% of the maximum dollar amount of the line of credit if
prepayment is made within one year from the date of this Agreement, and 1% of
such amount if prepayment is made thereafter.
18. EARLY TERMINATION. If Borrower defaults in any manner as provided
in Paragraph 14 above, then, anything contained in this Agreement or any
supplement notwithstanding, Lender shall have the right to terminate this
Agreement at any time without notice, and if Lender stops making advances to
Borrower, such act under these circumstances shall be treated as one of
termination. On such termination date, all outstanding obligations due under
- 10 -
<PAGE>
this Agreement or any supplement or other agreement between Lender and Borrower,
or any affiliate of Lender's, shall immediately become due and payable without
further notice, act or demand on Lender's part. All of Lender's rights under
this Agreement shall continue notwithstanding termination, and Lender's security
interest in all Receivables, Inventory and other collateral, then or thereafter
existing, shall also remain in full force. Borrower shall further be required to
furnish Lender with all reports, schedules and confirmatory assignments of all
Receivables, and to turn over all payments on the Receivables and other
proceeds, as if this Agreement had not terminated, until Borrower has satisfied
all of its obligations to Lender.
19. ENVIRONMENTAL LIABILITIES. The Borrower agrees that Lender shall not
assume any liability or obligation for loss, damage, fines, penalties, claims or
duty to clean-up or dispose of wastes or materials on or relating to the
collateral or other property of the Borrower regardless of any inspections made
by the Lender prior to the consummation of this transaction or as a result of
any conveyance of title to the Lender by foreclosure, deed in lieu of
foreclosure, or otherwise. The Borrower agrees to remain fully liable and shall
indemnify and hold harmless Lender from any costs, expenses, clean-up costs,
waste disposal costs, litigation costs, fines, penalties, including without
limitation those costs, expenses, penalties and fines within the meaning of the
Comprehensive Environmental Response, Compensation and Liability Act, and other
federal or state laws and regulations, now or in the future in effect, and all
other related liabilities. Any claim Lender may have against the Borrower
pursuant to this paragraph shall be part of the obligations.
20. REINSTATEMENT OF OBLIGATIONS AND SECURITY. To the extent that
Borrower makes a payment to Lender or Lender receives any payment(s) or proceeds
of Receivables or other collateral for Borrower' s benefit, which payment(s) or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable doctrine, then, to the extent of such payment(s) or
proceeds received, the Borrower's obligations or part thereof intended to be
satisfied thereby shall be reinstated and continue in full force and effect, and
all collateral security therefor shall remain in full force and effect (or be
reinstated), as if such payment(s) or proceeds had not been received by Lender,
and an appropriate adjustment to Borrower's loan balance may be recorded, until
payment shall have been made to Lender, which payment shall be due on demand.
21. CHIEF EXECUTIVE OFFICE; TRADENAMES. Borrower further warrants and
covenants that:
(a) its chief executive office and principal place of business is
located at 633 Lawrence Street, Batesville, Arkansas 75201;
(b) its Business Records are kept at the following location(s):
633 Lawrence Street, Batesville, Arkansas 75201
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<PAGE>
(c) its corporate name is exactly as set forth on the signature page
of this Agreement and Borrower has not changed its corporate name since
the date of its incorporation, nor has it or does it use any tradenames
or tradestyles except Professional Dental Technologies and Services,
Pro-Dentec, Prism and Rota Point; and
(d) Borrower shall provide Lender with 15 days prior written notice
of any change with respect to any of the foregoing.
22. LEGAL RATE ADJUSTMENT. This Agreement, all supplements thereto and
all other notes, security agreements and mortgages between the Borrower and
Lender pertaining to the obligations of the Borrower are expressly limited so
that in no event whatsoever shall the amount of interest paid or agreed to be
paid to Lender exceed the highest rate of interest permissible under applicable
law. If, from any circumstances, fulfillment of any provision of this Agreement
or such other notes and agreements at the time performance of such provisions
shall be due, shall involve exceeding the interest limitation validly prescribed
by law which a court of competent jurisdiction may deem applicable, then the
obligation to be fulfilled shall be reduced to an amount computed at the highest
rate of interest permissible under applicable law, and if, for any reason
whatsoever, Lender shall ever receive as interest an amount which would be
deemed unlawful under applicable law, such interest shall be automatically
applied to the payment of the principal of such obligation (whether or not then
due and payable), and not to the payment of interest, or shall be refunded to
the Borrower, if such principal has been paid in full.
23. SET-OFF. In addition to any rights and remedies of Lender provided by law,
Lender shall have the right, without prior written notice to the Borrower, any
such notice being expressly waived by Borrower to the extent permitted by
applicable law, upon the occurrence of any event of default and so long as such
event of default is continuing, to set off and apply against any obligations,
whether matured or unmatured, of the Borrower to Lender, any amount owing by
Lender to Borrower, at or at any time after the happening of any of the above
mentioned events, and such right of set-off may be exercised by Lender against
Borrower or against any assignee for the benefit of creditors, receiver, or
execution, judgment or attachment creditor of Borrower, or against anyone else
claiming through or against the Borrower of such assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by Lender prior to the making, filing or issuance or service upon
Lender of, or of notice of, assignment for the benefit of creditors, appointment
or application for the appointment of a receiver, or issuance of execution,
subpoena or order or warrant. Lender agrees promptly to notify the Borrower
after any set-off and application made by Lender, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
24. GENERAL PROVISIONS.
(a) Lender's failure to exercise any right or remedy or option
under this Agreement, or any delay by Lender in exercising any of them,
will not operate as a waiver. Borrower understands that the only way
Lender may waive its rights is in writing signed by an authorized agent
of Lender.
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<PAGE>
(b) All of Lender's rights and remedies under this Agreement are
cumulative and not exclusive one of the other.
(c) If any provision of this Agreement is unenforceable for any
reason, it shall not affect the enforceability of the other provisions
of this Agreement.
(d) Borrower also understands that this Agreement cannot be
changed or terminated orally, and that it is for the benefit of Lender
and its successors and assigns and is binding upon Borrower and its
permitted successors and assigns.
(e) Borrower shall not delegate its duties or assign its rights
and obligations under this Agreement without the prior written consent
of Lender.
(f) In addition to this Agreement, Borrower may execute with
Lender one or more riders, supplements or other agreements which shall
form a part of this Agreement. If there is an express conflict between
the terms of this Agreement and those contained in any rider, supplement
or other agreement, the terms of this Agreement shall control unless
such other rider, supplement or other agreement specifically provides
otherwise.
(g) This Agreement, together with any written supplements, riders
or other agreements, is the entire agreement between the parties
relating to the subject matter of this Agreement, and supersedes all
prior agreements, commitments and understandings between the parties.
(h) Except and only to the extent that the perfection of Lender's
security interests may be governed by the laws of another jurisdiction,
this Agreement is to be governed by the internal laws of the State of
Michigan, including the Uniform Commercial Code as adopted in Michigan.
Unless otherwise defined, the terms used in this Agreement shall have
the meaning given them in the Uniform Commercial Code.
(i) Neither this agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against the Lender or Borrower,
whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by all parties and shall be construed
and interpreted according to the ordinary meaning of the words used so
as to fairly accomplish the purposes and intentions of all parties
hereto.
(j) Except where the context otherwise requires, each term stated
in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender
shall include the masculine, feminine and neuter.
(k) Any reference to a rider, supplement or other document or
agreement shall include any amendments, modifications, renewals,
restatements, extensions, supplements, or substitutions thereof which
may hereafter be executed in accordance with the terms hereof.
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<PAGE>
(l) All exhibits referenced in this Agreement shall be deemed to
be incorporated into this Agreement as if entirely set forth herein.
(m) This Agreement may be executed in one or more counterparts.
25. JOINT AND SEVERAL LIABILITY.
(a) The obligations and liabilities of Borrower under, and all
representations, warranties and covenants of Borrower in this Agreement
and the other documents relating to obligations of Borrower to Lender
shall be joint and several in all respects whatsoever. The term
"Borrower" shall apply to each Borrower individually and collectively
and each Borrower shall be jointly and severally liable.
(b) Lender may deal with either Borrower as if it were the sole
obligor, without inpairing in any way the liability of the other
Borrower. Without limiting the generality of that right, Lender may in
particular release, impair, or fail to perfect an interest in any
collateral of either Borrower, waive defaults by either Borrower, or
extend, compromise or release the liability of either Borrower, without
the consent of the other Borrower.
(c) Each Borrower represents that it has carefully considered the
alternatives to and the legal consequence of incurring joint and several
liability for the obligations to Lender and has determined that by such
arrangement it is able to obtain financing on terms more favorable than
otherwise, and that under a joint and several loan facility, it will
realize substantial interest savings over alternative financing
arrangements. Borrower also represents and warrants that the businesses
of each are integrally related, and that the success of each Borrower is
a direct business benefit to the other.
(d) Lender may bring a separate action or actions on the
obligations of Borrower against either Borrower, whether or not the
other is or is not joined therein. Each Borrower agrees that any release
which may be given to the other or any Guarantor of the obligations of
Borrower shall not release the other Borrower from its obligations. Each
Borrower waives any right to assert against Lender any defense (legal or
equitable), set off, counterclaim, or claims which such Borrower
individually nay now or any time hereafter have against the other
Borrower or any other party liable to Lender in any manner whatsoever.
(e) Any and all present and future debt and other obligations of
either Borrower to the other Borrower are hereby subordinated to the
full payment and performance of the obligations of Borrower to Lender;
provided, however, such debt and other obligations may be incurred and
repaid, subject to the terms of this Agreement, so long as no default
has occurred.
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<PAGE>
(f) Each Borrower is presently informed as to the financial
condition of the other Borrower, and of all other circumstances which a
diligent inquiry would reveal and which bear upon the risk of nonpayment
of the obligations of Borrower to Lender. Each Borrower hereby covenants
that it will continue to keep itself informed as to the financial
condition of the other Borrower, the status of the other Borrower, and
of all circumstances which bear upon the risk of nonpayment. Absent a
written request from Borrower to Lender for information, each Borrower
hereby waives any and all rights it may have to require Lender to
disclose to such Borrower any information which Lender may now or
hereafter acquire concerning the condition or circumstances of the other
Borrower.
(g) Each Borrower waives all rights to notices of default,
existence, creation, or incurring of new or additional indebtedness, and
all other notices of formalities to which such Borrower may, as a joint
and several Borrower hereunder, be entitled.
26. NOTICE. Borrower agrees to give prompt notice to Lender of the
occurrence of (i) any event of default and (ii) any other development, financial
or otherwise, which would affect the Borrower's or the Guarantor's business,
properties or affairs in a materially adverse manner.
27. ACKNOWLEDGMENT OF BORROWER. THIS AGREEMENT HAS BEEN FREELY AND
VOLUNTARILY ENTERED INTO WITH THE LENDER BY THE BORROWER, WITHOUT ANY DURESS OR
COERCION, AND AFTER THE BORROWER HAS EITHER CONSULTED WITH COUNSEL OR HAS BEEN
GIVEN AN OPPORTUNITY TO DO SO, AND THE BORROWER ACKNOWLEDGES THAT IT HAS
CAREFULLY AND COMPLETELY READ ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT.
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<PAGE>
28. WAIVER OF JURY TRIAL. BORROWER AND LENDER ACKNOWLEDGE THAT THE RIGHT
TO A TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT THE RIGHT MAY BE WAIVED.
BOTH BORROWER AND LENDER EACH KNOWINGLY, VOLUNTARILY, IRREVOCABLY AND WITHOUT
COERCION, WAIVE ALL RIGHTS TO TRIAL BY JURY OF ALL DISPUTES BETWEEN THEM.
NEITHER LENDER NOR BORROWER SHALL BE DEEMED TO HAVE GIVEN UP THIS WAIVER OF JURY
TRIAL UNLESS THE PARTY CLAIMING THAT THIS WAIVER HAS BEEN RELINQUISHED HAS A
WRITTEN INSTRUMENT SIGNED BY THE OTHER PARTY STATING THAT THIS WAIVER HAS BEEN
GIVEN UP.
PROFESSIONAL DENTAL HYGIENISTS, INC., d/b/a
Professional Dental Technologies and Services
---------------------------------------------
(Name of Borrower)
an Arkansas corporation
By: /s/ Frank H. Newton, III
-----------------------------------------
Its: VICE PRESIDENT
633 Lawrence
Batesville, Arkansas 75201
---------------------------------------------
(Address of Borrower)
PROFESSIONAL DENTAL TECHNOLOGIES, INC., d/b/a
Pro-Dentec, d/b/a Prism, d/b/a Rota Pint
---------------------------------------------
(Name of Borrower)
a Nevada corporation
By: /s/ Frank H. Newton, III
-----------------------------------------
Its: Chief Operating Officer
633 Lawrence
Batesville Arkansas 75201
---------------------------------------------
(Address of Borrower)
NBD BANK
By: /s/ Harold Dalton
------------------------------------------
Its: Vice-President
-------------------------------------
701 First National Building
Detroit, Michigan 48226
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<PAGE>
EQUIPMENT AND FIXTURES SECURITY AGREEMENT
-----------------------------------------
Date: June 25, 1996
NBD BANK ("Lender") and Professional Dental Technologies, Inc.,
d/b/a Pro- Dentec, d/b/a Prism, d/b/a Rota Point and Professional Dental
Hygienists, Inc., d/b/a Professional Dental Technologies and Services
(collectively the "Borrower") agree to the following:
1. SUPPLEMENT TO SECURED CREDIT AGREEMENT. This Agreement is a
supplement to a Secured Credit Agreement (Accounts Receivable and Inventory) of
even date herewith (the "Secured Credit Agreement") between Lender and Borrower.
This Agreement (the "Equipment Agreement") shall secure all of Borrower's
obligations under the Secured Credit Agreement and under the "Term Note(s)", and
the other obligations described in Paragraph 5 below, and shall remain in effect
for so long as such obligations remain unsatisfied.
2. GRANT OF SECURITY. In addition to any other security granted to
Lender, Borrower grants to Lender a lien and security interest in all equipment
and fixtures (the "Equipment") owned by Borrower, now or in the future, or in
which Borrower has or, in the future may have, rights of any kind, together with
any and all proceeds of the Equipment to secure all obligations of Borrower to
Lender, including the obligations described in Paragraph 5 below.
3. DEFINITION OF EQUIPMENT. The term "Equipment" shall include all
equipment, fixtures, chattels, machinery, furniture and like personal property
owned by Borrower, now or in the future, bought for or used by Borrower in
Borrower's business, or in which Borrower obtains rights of any kind, including
rights under any lease, whether a true lease or a lease intended as security,
and wherever such collateral is located, including all such collateral located,
affixed or to be affixed to premises commonly known as:
633 Lawrence, 2410 Harrison, 1210 Batesville and 301 N. Main, Batesville,
Arkansas
The Equipment also includes, but is not limited to, all
accessories, machinery parts and appurtenances attached, kept, used or intended
for use in connection with any equipment and fixtures and all apparatus, tools,
supplies, materials, blue prints and plans.
4. GOOD TITLE AND PRIOR SECURITY INTERESTS. Borrower warrants that it
is the lawful owner of all of the Equipment and has complete authority to grant
a security interest in this collateral. The Equipment is free of all other
liens, security interests, encumbrances and adverse claims (collectively "Other
Liens") except as set forth on Exhibit A attached hereto and made a part hereof.
If there are any Other Liens which Lender has not agreed may be continued,
Borrower shall pay and discharge the same immediately. If Borrower fails to do
so, Lender may, at its option, pay or discharge such Other Liens, in whole or in
part, and Borrower shall immediately reimburse Lender for all such sums so paid
by Lender. Any such payments made by Lender to discharge any such Other Liens,
not reimbursed by Borrower, shall form part of the Obligations as defined in
this Equipment Agreement and the Secured Credit Agreement and shall be secured
by all security granted by Borrower to Lender under this and any other
agreement.
<PAGE>
5. PAYMENT AND OBLIGATIONS. All of Borrower's obligations to Lender
shall be payable as provided in the Secured Credit Agreement or as provided in
the Term Note(s), if any, given by Borrower to Lender simultaneously with the
execution and delivery of this Agreement to Lender or hereafter (together with
all amendments, restatements, modifications, renewals, extensions or
substitutions of any of them, collectively "Term Note(s)"). Borrower's
obligations (the "Obligations") to Lender include the principal on all loans and
advances under this Agreement, the Secured Credit Agreement, the Term Note(s),
if any, or under any other agreement, the interest accrued and unpaid, under any
such agreements or Term Note(s), all liabilities acquired by purchase by Lender,
by assignment or participation, and all other obligations, however arising,
whenever arising, howsoever evidenced and whether absolute or contingent, due or
to become due. Furthermore, all reasonable costs and expenses incurred by Lender
or its agents in connection with this Agreement, the Secured Credit Agreement,
the Term Note(s), if any, and all other obligations to Lender shall be part of
Borrower's Obligations and secured by the Equipment. Such costs and expenses
include reasonable attorneys' fees and court costs incurred by Lender in
obtaining legal advice regarding this Equipment Agreement or any loans,
including the preparation and review of this Equipment Agreement and all related
agreements and documents, or in enforcing payment of Borrower's Obligations or
to obtain possession of the Equipment or to perfect, renew or extend Lender's
security interest or to demand any action or proceeding related to this
Equipment Agreement or any other agreement or the Term Note(s) between Lender
and Borrower, including any costs and expenses of any proceeding in which Lender
is involved with Borrower, such as the costs and fees of lifting the automatic
stay, the costs of preserving and liquidating the Equipment, and the amounts of
all unpaid taxes and similar charges owing by Borrower to any governmental
authority only with respect to the Equipment or other collateral, and not
otherwise, and which Lender is required to pay or deposit for Borrower's
account.
6. RATE OF INTEREST. The interest to be charged on all Obligations
under this Equipment Agreement and the Secured Credit Agreement shall be based
on the terms and conditions set forth in the Secured Credit Agreement.
7. INSURANCE. Borrower shall insure the Equipment for Lender's benefit
against loss or damage by fire, theft, burglary, pilferage, loss in transit and
such other hazards as Lender may specify, in amounts and under policies and by
insurers reasonably acceptable to Lender, and all premiums shall be paid by
Borrower and the policies or certified copies of such policies delivered to
Lender. If Borrower fails to do so, Lender may procure such insurance and the
amounts so expended by Lender shall become part of the Obligations under this
Equipment Agreement and the Secured Credit Agreement. No cancellation of such
insurance or material change in the terms of any policy shall be made without
the insurance carrier giving Lender at least 30 days prior written notice.
- 2 -
<PAGE>
8. SETTLEMENT OF INSURANCE CLAIMS. In the event of any casualty to the
Equipment which is covered by insurance, Borrower authorizes Lender to settle
any claim or proceed to suit and judgment for all insurance proceeds arising out
of the casualty to the Equipment, and upon receipt of payment of such proceeds,
Lender, at its option, may apply all payments to the obligations in any order
Lender determines or to the restoration or replacement of the Equipment.
Notwithstanding the foregoing if Borrower is not in default under
this agreement or any of the loan documents, nor do circumstances exist that
with the passage of time, the giving of notice, or both would constitute such a
default, Lender shall allow the Borrower to use the insurance proceeds to repair
and restore the Equipment.
9. DEFAULTS. If any of the following things happen, Lender shall have
the remedies provided below in paragraph 10:
(a) if, after demand, Borrower fails to make any payment
required of Borrower under this Equipment Agreement, the Secured Credit
Agreement, the Term Note(s), or any other agreement with Lender, or, if
no demand has been made, if Borrower fails to make any payment required
of Borrower under this Equipment Agreement, the Secured Credit
Agreement, the Term Note(s) or any other agreement with Lender when and
as due;
(b) if Borrower otherwise breaches any term or provision of
this Equipment Agreement, the Secured Credit Agreement, the Term
Note(s), or any other agreement with Lender, other than a default under
Paragraph 9(a) above;
(c) if Borrower or any Guarantor of the amounts due under this
Agreement ("Guarantor") becomes insolvent or generally unable to meet
its debts as they become due, or fails, suspends, or goes out of
business;
(d) if Borrower's Tangible Net Worth (as defined below) is
ever less than $ 2,000,000.00. For the purposes of this provision,
Tangible Net Worth means total assets less intangible assets, prepaids,
investments in affiliates, advances to officers, employees, and
affiliates, and total liabilities all as determined by the Lender.
Intangible assets include goodwill, patents, copyrights, mailing lists,
catalogs, trademarks, bond discounts and underwriting expenses,
organization expenses, and all other intangibles.
(e) if Borrower or any Guarantor suffers a material loss of
any of its property or assets that is not covered by insurance
satisfactory to Lender;
(f) if a trustee, receiver or custodian is appointed over all
or substantially all of Borrower's or any Guarantor's property;
- 3 -
<PAGE>
(g) if any proceeding in bankruptcy, insolvency or
reorganization is instituted by or against Borrower or any Guarantor;
(h) if Borrower or any Guarantor makes an assignment for the
benefit of creditors or a composition with any of its creditors;
(i) if the Borrower makes additional net investments in, or
advances to, its nonconsolidated joint ventures exceeding $400,000 in
the aggregate during a period commencing with the execution of this
agreement and ending on the Borrower's current fiscal year, and
thereafter if the Borrower makes any additional net investment in, or
advance to, its nonconsolidated joint ventures without the Lender's
prior consent;
(j) if the Borrower guaranties or otherwise becomes or remains
secondarily liable on the undertaking of another, including any
affiliate of Borrower but excluding endorsement of drafts for deposit
and collection in the ordinary course of business; or
(k) if the Borrower or any Guarantor defaults under the terms
of any agreement or instrument relating to any debt for borrowed money,
other than a default under Paragraphs 9 (a) or 9 (b), such that the
creditor declares the debt due before its maturity.
10. RIGHTS AND REMEDIES. If Borrower defaults under this Equipment
Agreement, Lender may take physical possession of the Equipment or any part of
such collateral at any time or times, and maintain such possession on Borrower's
premises. Lender may also remove such Equipment or any part of it to such other
place(s) as it may wish. If Lender exercises its right to take possession of the
Equipment, Borrower shall, on Lender's demand, assemble it and make it available
to Lender, at a place reasonably convenient to Lender. After Borrower has
defaulted on the Obligations, Borrower will, if it is a tenant of the premises
where the Equipment is located, at Lender's option, assign to Lender its rights
under its Lease. Borrower shall also, if a tenant of the premises where the
Equipment is located, permit Lender to occupy such premises rent free for at
least 90 days so that Lender may sell or otherwise dispose of the Equipment and
other security it has for the Obligations without incurring the expense of
removing such Equipment and other collateral from such premises. In addition,
with respect to all Equipment as well as all other collateral, Lender shall have
all of the rights and remedies set forth in the Secured Credit Agreement, and
all of the rights and remedies available to Lender as a secured party under the
Uniform Commercial Code or other law.
11. FAILURE TO REPAIR. If Borrower fails to repair the Equipment or
keep the Equipment in good repair and operating condition, Lender may, at its
option, repair or replace any Equipment, and Borrower shall immediate1y
reimburse Lender for all costs it has incurred in doing so. If Borrower fails to
reimburse Lender for all sums expended by Lender in this regard, such expenses
shall form part of the Obligations under this Equipment Agreement and the
Secured Credit Agreement, and the Term Note(s), if any, and shall be secured by
all of the collateral granted to Lender under this Equipment Agreement and the
Secured Credit Agreement.
- 4 -
<PAGE>
12. ANTI-SALE AND LIEN PROVISION. Without Lender's prior written
consent, Borrower shall not sell, assign, lease, mortgage, encumber, suffer or
grant any security interest or lien in or dispose of the Equipment with an
aggregate value exceeding $20,000.00, or any part of it or interests in it, nor
shall Borrower attempt to do so.
13. REMOVAL OF COLLATERAL. Without Lender's prior written consent,
Borrower shall not remove or attempt to remove or suffer anyone else to remove
or permit them to remove any of the Equipment with an aggregate value exceeding
$20,000.00, from the place(s) where it is now located.
14. PAYMENT OF TAXES. Borrower shall also make payment of all taxes,
impositions, judgments and other claims, which could or would create a right of
seizure or levy upon the Equipment or create a security interest in or lien on
the Equipment.
15. MOTOR VEHICLE COLLATERAL. If any part of the Equipment consists of
motor vehicles or certificated vehicles, as defined by the law governing this
Equipment Agreement or such vehicles, then the amount allocated to such motor
vehicles or certificated vehicles shall be $ 0.
16. ANTI-WAIVER AND SEVERABILITY. Lender's failure to exercise any
right, remedy or option under this Equipment Agreement, or any delay by Lender
in exercising any of them, will not operate as a waiver. Borrower understands
that the only way Lender may waive its rights is in writing signed by an
authorized agent of Lender. All of Lender's rights and remedies under this
Equipment Agreement are cumulative and not exclusive of each other. If any
provision of this Equipment Agreement is unenforceable for any reason, it shall
not affect the enforceability of the other provisions of this Equipment
Agreement.
17. MISCELLANEOUS. Borrower also understands that this Equipment
Agreement cannot be changed or terminated orally, and that it is for the benefit
of Lender, its successors and assigns and is binding upon Borrower and its
permitted successors and assigns. In addition to this Equipment Agreement,
Borrower has executed with Lender the Secured Credit Agreement and one or more
Riders or Supplements which shall form a part of that Agreement. If there is an
express conflict between the terms of this Equipment Agreement and the terms of
the Secured Credit Agreement, the terms of the Secured Credit Agreement shall
control. If there is an express conflict between the terms of this Equipment
Agreement and those contained in any Rider or Supplement to it, the terms of
this Equipment Agreement shall control unless the Rider or Supplement
specifically provides otherwise. This Equipment Agreement, together with the
Secured Credit Agreement, written supplements or riders executed by Lender and
Borrower, and the Term Note(s), if any, is the entire agreement between the
parties relating to the subject matter, and supersedes all prior agreements,
commitments and understandings of the parties. This Equipment Agreement may be
executed in one or more counterparts, each of which shall be deemed one and the
same original instruments. Except and only to the extent that the perfection of
Lender's security interests may be governed by the laws of another jurisdiction,
this Equipment Agreement is to be governed by the internal laws of the State of
Michigan, including the Uniform Commercial Code as adopted in Michigan. Unless
otherwise defined, the terms used in this Equipment Agreement shall have the
meaning given them in the Uniform Commercial Code.
- 5 -
<PAGE>
18. WAIVER OF JURY TRIAL. BORROWER AND LENDER ACKNOWLEDGE THAT THE
RIGHT TO A TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT THE RIGHT MAY BE
WAIVED. BOTH BORROWER AND LENDER EACH KNOWINGLY, VOLUNTARILY, IRREVOCABLY AND
WITHOUT COERCION, WAIVE ALL RIGHTS TO A TRIAL BY JURY OF ALL DISPUTES BETWEEN
THEM. NEITHER LENDER NOR BORROWER SHALL BE DEEMED TO HAVE GIVEN UP THIS WAIVER
OF JURY TRIAL UNLESS THE PARTY CLAIMING THAT THIS WAIVER HAS BEEN RELINQUISHED
HAS A WRITTEN INSTRUMENT SIGNED BY THE OTHER PARTY STATING THAT THIS WAIVER HAS
BEEN GIVEN UP.
PROFESSIONAL DENTAL HYGIENISTS, INC., d/b/a
Professional Dental Technologies and Services
---------------------------------------------
(Name of Borrower)
an Arkansas corporation
By: /s/ Frank H. Newton, III
----------------------------------------
Its: Vice President
633 Lawrence
Batesville, Arkansas 75201
---------------------------------------------
(Address of Borrower)
PROFESSIONAL DENTAL TECHNOLOGIES, INC., d/b/a
Pro-Dentec, d/b/a Prism, d/b/a Rota Point
---------------------------------------------
(Name of Borrower)
a Nevada corporation
By: /s/ Frank H. Newton, III
---------------------------------------
Its: Chief Operating Officer
633 Lawrence
Batesville Arkansas 75201
-----------------------------------------
(Address of Borrower)
NBD BANK
By: /s/ Harold Dalton
----------------------------------------
Its: Vice President
701 First National Building
Detroit, Michigan 48226
- 6 -
<PAGE>
EXHIBIT A
PERMITTED LIEN LIST
SECRETARY OF STATE OF ARKANSAS
FILE NUMBER RECORDING DATE SECURED PARTY
- ----------- -------------- -------------
755450 May 29, 1991 Pitney Bowes Credit Corp.
768395 September 13, 1991 The Citizens Bank
768396 September 13, 1991 The Citizens Bank
882236 January 7, 1994 Eaton Financial Corporation
884210 January 24, 1994 Miles Financial Services, Inc.
896102 April 5, 1994 Citizens Bank of Batesville
1004324 February 29, 1996 CIT Group/Equipment Financing
1004325 February 29, 1996 CIT Group/Equipment Financing
1006426 March 12, 1996 CIT Group/Equipment Financing
1006427 March 12, 1996 CIT Group/Equipment Financing
1008581 March 22, 1996 CIT Group/Equipment Financing
1008582 March 22, 1996 CIT Group/Equipment Financing
INDEPENDENCE COUNTY, ARKANSAS
FILE NUMBER RECORDING DATE SECURED PARTY
- ----------- -------------- -------------
48506 September 16, 1991 The Citizens Bank
48507 September 16, 1991 The Citizens Bank
49340 February 20, 1992 AGFA Financial Services
786855 February 21, 1992 AGFA Financial Services
53364 January 10, 1994 Eaton Financial Corporation
53475 January 28, 1994 Miles Financial Services, Inc.
53891 April 1, 1994 Citizens Bank of Batesville
58170 February 29, 1996 CIT Group/Equipment Financing
58172 February 29, 1996 CIT Group/Equipment Financing
58244 March 12, 1996 CIT Group/Equipment Financing
58245 March 12 ,1996 CIT Group/Equipment Financing
58294 March 22, 1996 CIT Group/Equipment Financing
58295 March 22, 1996 CIT Group/Equipment Financing
<PAGE>
INTELLECTUAL PROPERTY AGREEMENT
This Agreement is entered into on JUNE 25, 1996 between Professional Dental
Technologies, Inc., a Nevada corporation ("Borrower"), and NBD Bank, a Michigan
banking corporation ("Lender").
Borrower has executed and delivered a Secured Credit Agreement dated JUNE 25,
1996. To induce Lender to provide credit evidenced by the Secured Credit
Agreement, Borrower has agreed to the followings terms and conditions regarding
all of its present and future trademarks, patents and related rights, including
but not limited to the trademarks and patents listed in the attached Schedule A
(collectively the "Intellectual Property").
THEREFORE, the parties agree as follows:
1. Borrower agrees that so long as any debt to Lender of any kind,
whenever and however such debt may arise ("Liabilities") is outstanding, the
Borrower shall not create or permit to exist any lien on Intellectual Property
other than future liens in favor of the Lender as contemplated by this
agreement.
2. So long as any Liabilities remain outstanding, Borrower further
agrees that it will not convey or transfer any interest in the Intellectual
Property or enter into any agreement (such as a license agreement) regarding the
Intellectual Property without the Lender's prior written consent with the
exception of a potential license for fluoride toothpaste to be granted to Warner
Lambert.
3. So long as any Liabilities remain outstanding, Lender shall have a
license to use the Intellectual Property to the extent deemed necessary by the
Lender to enforce any of its rights in any collateral pledged to the Lender by
the Borrower.
4. If at any time Lender in good faith deems itself undersecured, upon
demand, Borrower shall execute collateral assignments of the Intellectual
Property in form and substance acceptable to Lender on or within ten (10) days
of such demand and such additional documents as Lender deems necessary to
perfect its interest in such assets. In the event the Borrower does not execute
such assignments and documents within such ten (10) day period, the line of
credit provided under the Secured Credit Agreement shall cease and no additional
borrowings shall be permitted. At the expiration of such ten (10) day period,
provided no event of default has occurred, or any circumstances exist that with
the passage of time or the giving of notice, or both, would constitute a
default, Borrower shall have a period of ninety (90) days to obtain alternate
financing. At the expiration of such ninety (90) day period, all Liabilities
shall be due immediately without notice.
<PAGE>
5. WAIVER OF JURY TRIAL. BORROWER AND LENDER ACKNOWLEDGE THAT THE RIGHT
TO A TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT THE RIGHT MAY BE WAIVED.
BOTH BORROWER AND LENDER EACH KNOWINGLY, VOLUNTARILY, IRREVOCABLY AND WITHOUT
COERCION, WAIVE ALL RIGHTS TO A TRIAL BY JURY OF ALL DISPUTES BETWEEN THEM.
NEITHER LENDER OR BORROWER SHALL BE DEEMED TO HAVE GIVEN UP THIS WAIVER OF JURY
TRIAL UNLESS THE PARTY CLAIMING THAT THIS WAIVER HAS BEEN RELINQUISHED HAS A
WRITTEN INSTRUMENT SIGNED BY THE OTHER PARTY STATING THAT THIS WAIVER HAS BEEN
GIVEN UP.
PROFESSIONAL DENTAL
TECHNOLOGIES, INC. NBD BANK
By: /s/ Frank H. Newton, III By: /s/ Harold Dalton
-------------------------- --------------------------
Its: Chief Operating Officer Its: Vice President
-------------------------- ---------------------------
<PAGE>
SCHEDULE A
Patent No. Registration
Country Filing Date
5,078,158 USA 1-7-92
5,109,563 USA 5-5-92
5,205,302 USA 4-27-93
5,342,284 USA 8-30-94
5,052,419 USA 10-1-91
5,276,935 USA 1-11-94
5,373,599 USA 12-20-94
5,072,482 USA 12-17-91
5,148,568 USA 9-22-92
4,884,849 USA 12-5-89
4,827,552 USA 5-9-89
350,440 USA 9-13-94
5,112,226 USA 5-12-92
4,869,277 USA 9-26-89
5,234,009 USA 8-10-93
<PAGE>
SCHEDULE A
----------
TRADEMARK REG. NO.
PRO-DENTEC 1,953,949
PRO-DENTX 1,953,996
ROTA-DENT 1,431,860
VICTOR 1,804,289
PRO-CAM 1,798,603
MOBIUS 1,849,050
PROFESSIONAL RELATIONSHIP PROGRAM 1,849,625
PDT SENSOR 1,933,388
STM 1,935,285
SOFT TISSUE MANAGEMENT 1,890,856
BEYOND STM 1,900,160
Schedule of Leased Equipment No. 1, dated February 21, 1996, a part of Master
Lease dated February 21, 1996, between THE CIT GROUP/EQUIPMENT FINANCING,
INC. ("Lessor") and Professional Dental Technologies, Inc. ("Lessee"). The
Equipment listed on this Schedule will be located at
2410 Harrison Street Batesville Independence AR 72503
- -------------------------------------------------------------------------------
Address City County State Zip Code
LEASE TERM: The term of this Lease for the items described in this Schedule
shall be 62 months.
RENTALS: For said term or any portion hereof, Lessee shall pay to Lessor the
stated aggregate rentals, of which 3,096.60, is herewith paid in advance and the
balance of the rentals is payable in 59 equal, successive monthly payments as
stated, of which the first is due on the first monthly rental date set forth
below, and the others on a like date of each month thereafter, until fully paid.
#25914
- --------------------------------------------------------------------------------
Item Description of Equipment Aggregate Monthly
No. (include make, kind of unit, year, model Rental Rental
and serial number)
- --------------------------------------------------------------------------------
Two (2) New Nissei Model HM-7 Injection
Molding Machines, S/N's G01Q076 and
G01Q077; One
- --------------------------------------------------------------------------------
(1) New Nissei Model NS10-1A Injection
Molding Machine, S/N E1Q008 with SSE
System, NC21
- --------------------------------------------------------------------------------
(1) New Nissei Model NS20-2A Injection
Molding Machine, S/N E20Q008 with SSE
System, NC21
- --------------------------------------------------------------------------------
Control, all of the above including all
substitutions , additions, attachments,
- --------------------------------------------------------------------------------
replacements, accessions, and the proceeds 182,699.40 *
of all of the foregoing.
- --------------------------------------------------------------------------------
$3,096.60 to be paid on the 18th day of each month commencing March, 1996 to and
including April, 2001, except for the months of April 18, 1996 and May 18, 1996.
Interest begins to accrue as of the date of the Delivery and Installment
Certificate. Initial /s/FN
- --------------------------------------------------------------------------------
Date Date of Renewals Purchase
Item Lease Term First Monthly (No. of Years Option
No. Commences Rental and Price
Amount per
Year)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The Lease term commences on 3/18/96
The first Monthly Rental is due on __________________________
The Lease term may be renewed for _____ months with the Monthly Rental for such
renewal term of __________
The Lessee has the option to purchase the Equipment as of the last day of the
initial Lease term for $1.00
Special Provisions Instructions
Accepted:
Lessee:
Professional Dental Technologies, Inc.
By: /s/ Frank H. Newton, III, Title: C.O.O.
Lessor:
The CIT Group/Equipment Financing, Inc.
By: /s/ Chichelle Britan Title: Agent
<PAGE>
------------------------
Date
THE CIT GROUP/EQUIPMENT FINANCING, INC.
- -------------------------------------------------
Address
- -------------------------------------------------
City State Zip Code
Gentlemen:
You are irrevocably instructed to disburse the proceeds of the Schedule of
Leased Equipment No. ______ dated _________________, to Master Lease Agreement
dated _______________, between _____________________________________, as Lessee
and the CIT GROUP/Equipment Financing, as Lessor, as follows:
Payee Names and Addresses Amount
- ---------------------------------------------- -----------------
TempTek, Inc. $
-----------------
Blackstone Ind. Supplies $
-----------------
Do-All Arkansas Company $
-----------------
The CIT Group (Non-refundable processing fee) $
-----------------
$
-----------------
$
-----------------
Total Proceeds $
-----------------
Very truly yours,
____________________________________________
By: ___________________ Title:____________
<PAGE>
Schedule of Leased Equipment No. 2, dated February 21, 1996, a part of Master
Lease dated February 21, 1996, between THE CIT GROUP/EQUIPMENT FINANCING, INC.
("Lessor") and Professinal Dental Technologies, Inc. ("Lessee"). The Equipment
listed on this Schedule will be located at
2410 Harrison Street Batesville Independence AR 72503
================================================================================
Address City County State Zip Code
LEASE TERM: The term of this Lease for the items described in this Schedule
shall be 62 months.
RENTALS: For said term or any portion hereof, Lessee shall pay to Lessor the
stated aggregate rentals, of which $681.76, is herewith paid in advance and the
balance of the rentals is payable in 59 equal, successive monthly payments as
stated, of which the first is due on the first monthly rental date set forth
below, and the others on a like date of each month thereafter, until fully paid.
#25,915
<TABLE>
<CAPTION>
- --------------- ----------------------------------------------------- -------------- -----------
Item Description of Equipment Aggregate Monthly
No. (include make, kind of unit, year, model and Rental Rental
serial number)
- --------------- ----------------------------------------------------- -------------- -----------
<S> <C> <C> <C>
One (1) New TempTek Model A5, 5-Ten Sheller, S/N
____________; One (1) New TempTek Model
- --------------- ----------------------------------------------------- -------------- -----------
TC-1, 9KW, .75HP Temperature Controller; One - New
Okamato Model Linear 6x18, Handfeed
- --------------- ----------------------------------------------------- -------------- -----------
Surface Grinder, S/N _________; and the (1) New
Bridgeport Model A-1 Milling Machine.
- --------------- ----------------------------------------------------- -------------- -----------
Substitutions, additions, attachments,
replacements, accessions, and the proceeds of all
- --------------- ----------------------------------------------------- -------------- -----------
of the foregoing. 40,223.84 *
- --------------- ----------------------------------------------------- -------------- -----------
</TABLE>
$681.76 to be paid on the _____ day of each month commencing ________, 19__ to
and including ____________, 20__, except for the months of ________, 19__ and
_______, 19__. Interest begins to accrue as of the date of the Delivery and
Installment Certificate.
<TABLE>
<CAPTION>
- -------------------- ------------------ ------------------ ------------------ ------------------
Date Date of Renewals Purchase
Item Lease Term First Monthly (No. of Years and Option
No. Commences Rental Amount per Year) Price
<S> <C> <C> <C> <C>
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
</TABLE>
<PAGE>
The Lease term commences on _____________________________
The first Monthly Rental is due on __________________________
The Lease term may be renewed for _____ months with the Monthly Rental for such
renewal term of __________
The Lessee has the option to purchase the Equipment as of the last day of the
initial Lease term for $1.00
Special Provisions Instructions
Accepted:
Lessee:
Professional Dental Technologies, Inc.
By: /s/ Frank H. Newton, III Title: C.O.O.
Lessor:
The CIT Group/Equipment Financing, Inc.
By: ______________________ Title: _______________
<PAGE>
February 21, 1996
Date
THE CIT GROUP/EQUIPMENT FINANCING, INC.
Suite 220, 1180 West Swedesford Road
- ------------------------------------
Address
Berwyn PA 19312
- --------------------------------------------------------------------------------
City State Zip Code
Gentlemen:
You are irrevocably instructed to disburse the proceeds of the Schedule of
Leased Equipment No. 2 dated February 21, 1996, to Master Lease Agreement dated
February 21, 1996, between Professional Dental Technologies, Inc., as Lessee and
the CIT GROUP/Equipment Financing, as Lessor, as follows:
Payee Names and Addresses Amount
------------------------- ---------------
TempTek, Inc. $ 8,040.00
---------------
Blackstone Ind. Supplies $ 11,900.00
---------------
Do-All Arkansas Company $ 13,345.19
---------------
The CIT Group (Non-refundable processing fee) $ 250.00
---------------
$
---------------
$
---------------
$
---------------
Total Proceeds $ 33,535.19
---------------
Very truly yours,
Professional Dental Technologies, Inc.
By: /s/ Frank H. Newton, III Title: C.O.O.
<PAGE>
Schedule of Leased Equipment No. 3, dated March 6, 1996, a part of Master Lease
dated February 21, 1996, between THE CIT GROUP/EQUIPMENT FINANCING, INC.
("Lessor") and Professional Dental Technologies, Inc. ("Lessee").
The Equipment listed on this Schedule will be located at
2410 Harrison Street Batesville Independence AR 72503
================================================================================
Address City County State Zip Code
LEASE TERM: The term of this Lease for the items described in this Schedule
shall be 62 months.
RENTALS: For said term or any portion hereof, Lessee shall pay to Lessor the
stated aggregate rentals, of which $2,044.49, is herewith paid in advance and
the balance of the rentals is payable in 59 equal, successive monthly payments
as stated, of which the first is due on the first monthly rental date set forth
below, and the others on a like date of each month thereafter, until fully paid.
#26518
<TABLE>
<CAPTION>
- --------------- ---------------------------------------------------- ------------ -----------
Item Description of Equipment Aggregate Monthly
No. (include make, kind of unit, year, model and Rental Rental
serial number)
- --------------- ---------------------------------------------------- ------------ -----------
<S> <C> <C> <C>
One (1) New Nissei Model NS20-2A, Injection
Molding Machine, S/N
E20Q010 with 4 Sets of
- --------------- -------------------------------------------------- ------------ -----------
Mounting Pads; One (1) New Nissel Model NS40-5A,
Injection Molding Machine, S/N E40q026,
- --------------- ----------------------------------------------------- ------------ -----------
with 4 Sets of Mounting Pads, including all
substitutions, additions, attachments,
- --------------- ----------------------------------------------------- ------------ -----------
replacements, accessions, and the proceeds of all $122,669.40 *
of the foregoing.
- --------------- ----------------------------------------------------- ------------ -----------
- --------------- ----------------------------------------------------- ------------ -----------
</TABLE>
*$2,044.49 to be paid on the 18th day of each month commencing March, 1996 to
and including April, 2000, except for the months of April, 1996 and May, 1996.
Interest begins to accrue as of the date of the Delivery and Installment
Certificate. Initial /s/FN
<TABLE>
<CAPTION>
- -------------------- ------------------ ------------------ ------------------ ------------------
Date Date of Renewals Purchase
Item Lease Term First Monthly (No. of Years and Option
No. Commences Rental Amount per Year) Price
<S> <C> <C> <C> <C>
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
- -------------------- ------------------ ------------------ ------------------ ------------------
</TABLE>
<PAGE>
The Lease term commences on _____________________________
The first Monthly Rental is due on __________________________
The Lease term may be renewed for _____ months with the Monthly Rental for such
renewal term of __________
The Lessee has the option to purchase the Equipment as of the last day of the
initial Lease term for $1.00
Special Provisions Instructions
Accepted:
Lessee:
Professional Dental Technologies, Inc.
By: /s/ Frank H. Newton, III Title: C.O.O.
Lessor:
The CIT Group/Equipment Financing, Inc.
By: ______________________ Title: _______________
<PAGE>
March 6, 1996
Date
THE CIT GROUP/EQUIPMENT FINANCING, INC.
Suite 220, 1180 West Swedesford Road
- ------------------------------------
Address
Berwyn PA 19312
- ------------------------------------------------------------------------
City State Zip Code
Gentlemen:
You are irrevocably instructed to disburse the proceeds of the Schedule of
Leased Equipment No. 3 dated ____________________, to Master Lease Agreement
dated February 21, 1996, between Professional Dental Technologies, Inc., as
Lessee and the CIT GROUP/Equipment Financing, as Lessor, as follows:
Payee Names and Addresses Amount
------------------------- ---------------
Nissei America, Inc.. $ 100,700.00
- --------------------- --------------
The CIT Group (Non-refundable processing fee) $ 250.00
- --------------------------------------------- --------------
$
--------------
$
--------------
$
--------------
$
--------------
Total Proceeds $ 100,950.00
--------------
Very truly yours,
Professional Dental Technologies, Inc.
By: /s/ Frank H. Newton, III Title: C.O.O.
<PAGE>
SCHEDULE OF LEASED EQUIPMENT NO. ,4 dated March 19, 1996, a part of Master Lease
dated February 21, 1996, between THE CIT GROUP/EQUIPMENT FINANCING, INC.
("Lessor") and Professional Dental Technologies, Inc. ("Lessee"). The Equipment
listed on this Schedule will be located at
2410 Harrison Street Batesville Independence AR 72501
- --------------------------------------------------------------------------------
Address City County State Zip Code
LEASE TERM: The term of this Lease for the items described in this Schedule
shall be 62 months.
RENTALS: For said term or any portion thereof, Lessee shall pay to Lessor the
stated aggregate rentals, of which $377.99 is herewith paid in advance and the
balance of the rentals is payable in 59 equal, successive monthly payments as
stated, of which the first is due on the first monthly rental date set forth
below, and the others on a like date of each month thereafter, until fully paid.
#27100
- --------------------------------------------------------------------------------
ITEM DESCRIPTION OF EQUIPMENT AGGREGATE MONTHLY
NO. (INCLUDE MAKE, KIND OF UNIT, YEAR, MODEL RENTAL RENTAL
AND SERIAL NUMBER)
- --------------------------------------------------------------------------------
One (1) Presto-Model C-74, 1000 CAP, One $22,679.40 *
(1) Scutter Material Grinder, Model
FNSK-04,
- --------------------------------------------------------------------------------
One (1) SC15 Dryer with Accessories, One
(1) VS-1500 model Dust Collector, all of
the above including all substitutions,
additions, attachments, replacements,
accessions, and the proceeds of all of the
foregoing.
- --------------------------------------------------------------------------------
*$377.99 TO BE PAID ON THE ____ DAY OF EACH MONTH COMMENCING ________, 19__ TO
AND INCLUDING _______, 20_____, EXCEPT FOR THE MONTHS OF ________, 19__ AND
___________, 19__. INTEREST BEGINS TO ACCRUE AS OF THE DELIVERY AND
INSTALLATION.
- --------------------------------------------------------------------------------
DATE DATE OF RENEWALS PURCHASE
ITEM LEASE TERM FIRST MONTHLY (NO. OF YEARS OPTION
NO. COMMENCES RENTAL AND PRICE
AMOUNT PER
YEAR)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The Lease term commences on _______________________. The first Monthly Rental is
due on _____________________. The Lease term may be renewed for ____ months with
the Monthly Rental for such renewal term of ___________.
The Lessee has the option to purchase the Equipment as of the last day of the
initial Lease term for $1.00.
Special Provisions Instructions
ACCEPTED:
LESSEE:
PROFESSIONAL DENTAL TECHNOLOGIES, INC.
By: /s/ Frank H. Newton, III Title Chief Operating Officer
LESSOR:
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By _____________________________________ Title ______________________
<PAGE>
MARCH 19, 1996
Date
THE CIT GROUP/EQUIPMENT FINANCING, INC.
Suite 220, 1180 West Swedesford Road
- ------------------------------------------------
Address
BERWYN PA 19312
- ------------------------------------------------
City State Zip Code
Gentlemen:
You are irrevocably instructed to disburse the proceeds of the Schedule of
Leased Equipment No. 4 dated ____________________, to Master Lease Agreement
dated February 21, 1996, between Professional Dental Technologies, Inc., as
Lessee and the CIT GROUP/Equipment Financing, as Lessor, as follows:
PAYEE NAMES AND ADDRESSES AMOUNT
- -------------------------------------- ----------------
Donaldson Co., Inc. $ 3,264.00
----------------
Conair Corp. $ 5,925.00
----------------
Nissui Corp. $ 6,600.00
----------------
Little Rock Tool Service $ 2,570.00
----------------
$
----------------
$
----------------
$
----------------
Total Proceeds $ 18,359.00
----------------
Very truly yours,
Professional Dental Technologies, Inc.
- -------------------------------------------
By /s/ Frank H. Newton, III Title: Chief Operating Officer
<PAGE>
SCHEDULE OF LEASED EQUIPMENT NO. ,1 dated 7/24/96, a part of Master Lease
dated 7/24/96, between THE CIT GROUP/EQUIPMENT FINANCING, INC. ("Lessor") and
Professional Dental Technologies, Inc. ("Lessee").
The Equipment listed on this Schedule will be located at
2410 Harrison Street Batesville Independence AR 72501
==============================================================================
Address City County State Zip Code
LEASE TERM: The term of this Lease for the items described in this Schedule
shall be 60 months.
RENTALS: For said term or any portion hereof, Lessee shall pay to Lessor the
stated aggregate rentals, of which $1,553.37 is herewith paid in advance and the
balance of the rentals is payable in 59 equal, successive monthly payments as
stated, of which the first is due on the first monthly rental date set forth
below, and the others on a like date of each month thereafter, until fully paid.
#36083
- --------------------------------------------------------------------------------
ITEM DESCRIPTION OF EQUIPMENT AGGREGATE MONTHLY
NO. (INCLUDE MAKE, KIND OF UNIT, YEAR, MODEL RENTAL RENTAL
AND SERIAL NUMBER)
- --------------------------------------------------------------------------------
One (1) NS60-9A NISSEI Injection Molding $92,911.80 $1,548.53
Machine S/N:E60Q053
NC21 including all substitutions,
additions, attachments, replacements,
accessions, and the proceeds of all of the
foregoing.
- --------------------------------------------------------------------------------
The principal amount of the loan is $76,011.66, the rate of
interest payable on the principal amount of the loan is 8.50
percent (8.50%) per annum.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DATE DATE OF RENEWALS PURCHASE
ITEM LEASE TERM FIRST MONTHLY (NO. OF YEARS OPTION
NO. COMMENCES RENTAL AND PRICE
AMOUNT PER
YEAR)
- --------------------------------------------------------------------------------
1.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CIT #5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE: CHANGES TO INCLUDE THE COST OF MACHINE MODIFICATIONS AS INDICATED ON THE
ATTACHED.
Page 1 of 2
<PAGE>
The Lease term commences on 7-24-96
The first Monthly Rental is due on 7-24-96
The Lease term may be renewed for 0 months with the MonthlyRental for such
renewal term of _______________.
The Lessee has the option to purchase the Equipment as of the last day of the
initial Lease term for $____________.
Special Provisions Instructions
ACCEPTED:
LESSEE:
PROFESSIONAL DENTAL TECHNOLOGIES, INC.
- --------------------------------------------
By: /s/ Frank H. Newton, III Title C.O.O.
------------------------ -------------
LESSOR:
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By /s/ Cynthia Kirby Title TCII
- ---------------------------- -------------
Page 2 of 2
<PAGE>
Schedule of Leased Equipment No. 2, dated 7/24/96, a part of Master Lease
dated 7/24/96, between THE CIT GROUP/EQUIPMENT FINANCING, INC. ("Lessor") and
Professional Dental Technologies, Inc. ("Lessee").
The Equipment listed on this Schedule will be located at
2410 Harrison Street Batesville Independence AR 72501
==============================================================================
Address City County State Zip Code
LEASE TERM: The term of this Lease for the items described in this Schedule
shall be 60 months.
RENTALS: For said term or any portion hereof, Lessee shall pay to Lessor the
stated aggregate rentals, of which $408.01, is herewith paid in advance and the
balance of the rentals is payable in 59 equal, successive monthly payments as
stated, of which the first is due on the first monthly rental date set forth
below, and the others on a like date of each month thereafter, until fully paid.
$36,194
- --------------------------------------------------------------------------------
Item Description of Equipment Aggregate Monthly
No. (include make, kind of unit, year, model Rental Rental
and serial number)
- --------------------------------------------------------------------------------
One (1) model SC-30 small cerousel dryer $24,480.60 $408.01
including: standard control,
aftercooler kit CE16-4 cu ft capacity
insulated dryer _______
- --------------------------------------------------------------------------------
One (1) MDC Style floor stand w/casters for
mounting. One (1) 10163101 Single Tube
Distribution Box
One (1) SA-24 Scutter Sprue/Runner Return
System S/N:00000F159430001
- --------------------------------------------------------------------------------
One (1) Microline Vacuum Loader
One (1) Temperature Controller, TC-1-1.5 HP
240/3/60
One (1) Z2DF-Z Loader, Mini Vacuum Loader
including all
- --------------------------------------------------------------------------------
substitutions, additions, attachments,
replacements, accessions, and the proceeds
of all of the foregoing. The
- --------------------------------------------------------------------------------
principal amount of the loan is $19,471.58;
the interest charged is 9.75 percent
(9.75%) per annum.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Date Date of Renewals Purchase
Item Lease Term First Monthly (No. of Years Option
No. Commences Rental and Price
Amount per
Year)
- --------------------------------------------------------------------------------
7/24/96 9/3/96 0 1.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CIT #6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The Lease term commences on 7/24/96
The first Monthly Rental is due on 9/3/96
The Lease term may be renewed for 0 months with the Monthly Rental for
such renewal term of __________
The Lessee has the option to purchase the Equipment as of the last day of the
initial Lease term for $1.00
Special Provisions Instructions
Accepted:
Lessee:
Professional Dental Technologies, Inc.
By: /s/ Frank N. Newton, III Title: C.O.O.
Lessor:
The CIT Group/Equipment Financing, Inc.
By: /s/ Cynthia Kirby Title: TC II
<PAGE>
________________________
Date
THE CIT GROUP/EQUIPMENT FINANCING, INC.
_____________________________________________________
Address
_____________________________________________________
City State Zip Code
Gentlemen:
You are irrevocably instructed to disburse the proceeds of the Schedule of
Leased Equipment No. ______ dated ____________________, to Master Lease
Agreement dated ___________________, between
______________________________________, as Lessee and the CIT GROUP/Equipment
Financing, as Lessor, as follows:
Payee Names and Addresses Amount
- -------------------------------------------- -------------------
TempTek, Inc. $
-------------------
Blackstone Ind. Supplies $
-------------------
Do-All Arkansas Company $
-------------------
The CIT Group (Non-refundable processing fee) $
-------------------
$
-------------------
$
-------------------
$
-------------------
Total Proceeds $
-------------------
Very truly yours,
___________________________________________
By: ___________________ Title: ___________
<PAGE>
DELIVERY AND INSTALLATION CERTIFICATE
To: THE CIT GROUP/EQUIPMENT FINANCING, INC.
900 ASHWOOD PARKWAY - 6TH FLOOR
- ----------------------------------------------
Address
Atlanta GA 30338
- ----------------------------------------------
City State Zip Code
The undersigned hereby certifies that all of the goods, chattels and
equipment (all hereinafter called "equipment") described in the lease between
The CIT Group/Equipment Financing, Inc. (Lessor) and the undersigned (Lessee),
dated 7/25/96, (the Lease") have been furnished to the undersigned at the
location designated in the Lease, that delivery and installation of the
equipment have been fully furnished to the undersigned at the location
designated in the Lease, that delivery and installation of the equipment have
been fully completed as required, and that the equipment has been inspected and
accepted by the undersigned as satisfactory on 7/25/96. The undersigned
understands that you are relying on the foregoing certification in your purchase
of the equipment described in the Lease and, to induce you to purchase the
equipment, the undersigned agrees to settle all claims, defenses, setoffs and
counterclaims it may have with the Seller directly with the Seller and will not
set up any thereof against you, that its obligation to you is absolute, and that
you are neither the manufacturer, distributor nor seller of the equipment and
have no knowledge or familiarity with it.
One (1) NS60-9A NISSEI Injection Molding Machine S/N:E60Q053 NC21
including all substitutions, additions, attachments, replacements, accessions,
and the proceeds of all of the foregoing.
Dated: 7/25/96
LESSEE:
PROFESSIONAL DENTAL TECHNOLOGIES, INC.
- -------------------------------------------------------
Name of Individual, corporation or partnership
By /s/ Frank H. Newton, III Title: C.O.O.
If corporation, have signed by President, Vice President or Treasurer, and give
official title.
If owner or partner, state which.
Page 1 of 1
<PAGE>
DELIVERY AND INSTALLATION CERTIFICATE
To: THE CIT GROUP/EQUIPMENT FINANCING, INC.
900 Ashwood Parkway
- -----------------------------------------------
Address
Atlanta GA 30338
- -----------------------------------------------
City State Zip Code
The undersigned hereby certifies that all of the goods, chattels and
equipment (all hereinafter called "equipment") described in the lease between
The CIT Group/Equipment Financing, Inc. (Lessor) and the undersigned (Lessee),
dated July 24, 1996, (the "Lease") have been furnished to the undersigned at the
location designated in the Lease, that delivery and installation of the
equipment have been fully completed as required, and that the equipment has been
inspected and accepted by the undersigned as satisfactory on 9-4-96. The
undersigned understands that you are relying on the foregoing certification in
your purchase of the equipment described in the Lease and, to induce you to
purchase the equipment, the undersigned agrees to settle all claims, defenses,
setoffs and counterclaims it may have with the Seller directly with the Seller
and will not set up any thereof against you, that its obligation to you is
absolute, and that you are neither the manufacturer, distributor nor seller of
the equipment and have no knowledge or familiarity with it.
One (1) SA-24 Scutter Sprue/Runner Return System S/N:00000F1594300001
One (1) Temperature Controller, TC-1-1.5 HP 240/3/60
Dated: 9-4-96
LESSEE:
PROFESSIONAL DENTAL TECHNOLOGIES, INC.
- -------------------------------------------------------
Name of Individual, corporation or partnership
By /s/ Frank H. Newton, III Title C.O.O.
If corporation, have signed by President, Vice President or Treasurer, and give
official title.
If owner or partner, state which.
Page 1 of 1
EXHIBIT 21
SUBSIDIARIES OF PROFESSIONAL DENTAL TECHNOLOGIES, INC.
PDT Byte, Inc. (d/b/a Professional Dental Computers)
PDT FSC, Inc.
PDT Image, Inc. (d/b/a Pro-Dentec Canada)
PDT Production Corporation
PDT Therapeutics, Inc.
Professional Dental Hygienists, Inc. (d/b/a Professional Dental Technologies &
Services)
Professional Dental Manufacturing, Inc.
Professional Dental Marketing, Inc. (d/b/a Pro-Dentec)
Professional Dental Printing, Inc.
Professional Dental Probes, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 728
<SECURITIES> 400
<RECEIVABLES> 1733
<ALLOWANCES> 43
<INVENTORY> 2213
<CURRENT-ASSETS> 5523
<PP&E> 3609
<DEPRECIATION> 1629
<TOTAL-ASSETS> 7977
<CURRENT-LIABILITIES> 2908
<BONDS> 0
0
0
<COMMON> 141
<OTHER-SE> 3945
<TOTAL-LIABILITY-AND-EQUITY> 7977
<SALES> 22044
<TOTAL-REVENUES> 22044
<CGS> 8704
<TOTAL-COSTS> 12110
<OTHER-EXPENSES> 678
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 156
<INCOME-PRETAX> 395
<INCOME-TAX> 138
<INCOME-CONTINUING> 258
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 258
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
